Copper supply squeeze on horizon as China’s demand grows
This week copper reached a two-year high of $6,800 a ton. A growing number of copper market analysts and traders are of the opinion that prices are about to rise even further, in light of the declining spot reserves.
To a considerable extent this has been caused by unprecedented appetites from Chinese enterprises, as they emerge from the industrial lockdown brought about by the coronavirus pandemic. With factories now producing cars, household appliances, smartphones and electrical cables at accelerated rates, China’s Caixin manufacturing purchasing managers’ index for August reached its highest reading since January 2011.
In 2011 copper prices reached a record $10,190 a ton. Analysts from Citigroup this week have advised clients that if stockpiles dwindle to 2011 levels then a price of $8,000 is possible.
A fund manager at Red Kite Capital in London, George Daniel, is part of this consensus. He commented: “China has been sucking everything up. It feels like we’re getting into a period where there’s just no copper around.”
The current situation mirrors that of the early 2000s, the last time that Chinese companies bought up serious amounts of copper.
Copper inventories on the London Metals Exchange are currently at their lowest levels in 15 years. A year ago, reserves would have lasted their users for five days; now it is little more than a day.
Previously, it was possible for copper stored in other parts of the global supply chain to be diverted to the exchange’s storage depots. But now there are signs that copper is not able to flow back to the bourse as freely as before, so strong is the demand from China.
Vale invests $150mn to extend life of Manitoba operations
Vale has announced a $150mn CAD investment to extend current mining activities in Thompson, Manitoba by 10 years while aggressive exploration drilling of known orebodies holds the promise of mining well past 2040.
Global energy transition is boosting the market for nickel
The Thompson Mine Expansion is a two-phase project. The announcement represents Phase 1 and includes critical infrastructure such as new ventilation raises and fans, increased backfill capacity and additional power distribution. The changes are forecast to improve current production by 30%.
“This is the largest single investment we have made in our Thompson operations in the past two decades,” said Mark Travers, Executive Vice-President for Base Metals with Vale. “It is significant news for our employees, for the Thompson community and for the Province of Manitoba.
“The global movement to electric vehicles, renewable energies and carbon reduction has shone a welcome spotlight on nickel – positioning the metal we mine as a key contributor to a greener future and boosting world demand. We are proud that Thompson can be part of that future and part of the low carbon solution.”
Vale continues drilling program at Manitoba
Coupled with today’s announcement, Vale is continuing an extensive drilling program to further define known orebodies and search for new mineralization.
“This $150mn investment is just one part of our ambitious Thompson turnaround story. It is an indicator of our confidence in a long future for the Thompson operations,” added Dino Otranto, Chief Operating Officer for Vale’s North Atlantic Base Metals operations.
“Active collaboration between our design team, technical services, USW Local 6166, and our entire Thompson workforce has delivered a safe, efficient and fit-for-purpose plan that will enable us to extract the Thompson nickel resources for many years to come.”
The Thompson orebody was first discovered in 1956 by Vale (then known as Inco) following the adoption of new exploration technology and the largest exploration program to-date in the company’s history. Mining of the Thompson orebody began in 1961.
“We see the lighting of a path forward to a sustainable and prosperous future for Vale Base Metals in Manitoba,” said Gary Annett, General Manager of Vale’s Manitoba Operations.