The price of copper was hammered on Friday amid an escalating trade war between the world’s two largest economies and a global economic slowdown.
In early afternoon trading in New York, copper for delivery in July touched a low of $2.5685 a pound ($5,660 a tonne), down 3.6% from Thursday’s settlement to its weakest point for 2019.
Copper is now trading 23% below levels seen in June last year, technically placing the bellwether metal in a bear market.
US President Donald Trump said on Thursday he would impose an additional 10% tariff on $300 billion worth of Chinese imports, starting September 1, meaning effectively all Chinese exports are now subject to tariffs of at least 10%.
Base metals have had a shaky start to 2019, with a cautious first-quarter advance giving way to an April drop on uncertainty about the global economy and the impact Chinese stimulus will have on consumption.
Clouding the outlook are mixed signals on world growth. China’s first official gauge of the manufacturing sector fell in April, indicating that more may be needed to bed down the economic stabilization seen earlier this year. The euro area’s manufacturing slump showed tentative improvement, while data showed U.S. unemployment fell to a fresh 49-year low. Hanging over the market, though, is the question of when the U.S. and China will resolve their prolonged trade spat.
Growth prospects, as well as supply outlooks for the most-traded base metals, will be among topics discussed as traders, executives and financiers gather in Hong Kong for the annual LME Week Asia event. Here’s a summary of key discussion points:
Copper’s long-term appeal is a staple topic at LME gatherings (see here, here, and here). But the metal has failed to break out of a modest range since its slump in mid-2018, even as global mine supply tightens. Prices are often tied to the global macro mood, which has been soured by U.S.-China trade tensions and muted manufacturing activity.
In China, government stimulus has proved underwhelming so far, according to one of the nation’s top traders. Import premiums are waning and a high-profile trader’s financial woes are also weighing on sentiment. Barclays Plc predicts prices may end the year below $6,000 a ton, saying the macro backdrop still matters more than any supply issues. Still, copper bulls may take heart after Codelco said the downtrend in prices won’t last as consumption growth outstrips supply.
The key question in the market is whether China’s zinc smelters can process increasing global mine supply. Output constraints in the top producer — due to various disruptions and environmental strictures — have crimped their ability to do so. With treatment charges still at elevated levels, there’s growing expectations of a supply response from smelters that will pressure global prices. But not everyone is convinced.
“The economics of zinc are already telling smelters to produce as much as they can, and I don’t think that’s happening,” Colin Hamilton, managing director for commodities at BMO Capital Markets Ltd. said in a phone interview. “The question is, are we going to see them ramp up? If not, the zinc market has a problem because refined inventory is still very low”.
Last year was turbulent, with the market dominated by the prospect of U.S. sanctions on United Co. Rusal. With that episode resolved, attention has turned to more familiar concerns, especially Chinese capacity. Prices in London are broadly in line with where they started the year, constrained by weakness in demand and uncertainties around new Chinese plants.
Aluminum optimists point to dwindling stockpiles in China, greater restraint in permitting new capacity, as well as rising consumption. But some producers aren’t feeling so upbeat. China’s recent better-performing prices — crucial to setting the global tone — are “ unsustainable” given substantial capacity still waiting in the wings, Rusal warned in April.
After a strong start to 2018 following a 22% rally last year, nickel’s fall has also been swift, with the metal mainly used in steelmaking down 30% from its summer highs. Zinc and lead have reversed most of their 2017 gains while tin is the only base metal with a shot at ending the year in positive territory. The London Metal Exchange index is set to suffer its first down year since 2015.
Copper producers have been the worst hit in the mining sector this year, with US-based Freeport-McMoRan declining 47% from its 2018 peak. Toronto’s First Quantum Minerals is trading 53% below its 52-week high. Peru-focused Southern Copper Corp has dropped 46% since the summer while the decline for London-listed Antofagasta is 36%.
Among the diversifieds, Rio Tinto is also in bear market territory, but BHP has fared better – containing share price decline to 10% compared to the counter’s year high. Like the Anglo-Australian giants, Brazil’s Vale – down 18% from its 2018 high – has benefited from a relatively strong iron ore price, comprising the bulk of earnings for mining’s Big 3.
There are many different grades of copper and they have different prices. The best grade is known as the “M1” or “A1” grade which has a high value of about $7.80 to $8.10 per kg ( Oct, 2018) . M1 grades are clean copper strands that are larger than the pencil lead we use in school.
Always remove any kind of contaminants from your copper like paper, insulation, attachments and any other non copper items. It may require a work from you but hard work does pay off! Copper solids that have attachments or are not clean are accepted as well but they are known as 2nd grade copper and have a lower price than the best grade. It is best to check with your scrap vendor the value of both coppers to see if its worth the effort to clean up the copper!
Strip copper wires
Stripping your copper wires gives you more money! However, it may not always be the case depending on your speed and how efficient are you in stripping down. Sometimes it is better to sell the insulated copper than to strip it. Do not attempt to strip the wires down using your bare hands as it is dangerous.
Separate wires by types
Separating the wires according to their types gives saves the work from the scrap yard and thus, in return you get more money! We have written a blog post on how to separate them.
Work with someone you trust
Develop a relationship with a dealer who has a good reputation, is well established in the scrap community, and is the most qualified to process your specific scrap.
At Sin Hong Poh Metal Trading, we strive to be “The Choice” for your industrial metal scrap and recycling needs. We aim to do this by providing competitive pricing to help our customers increase their bottom line profitability and providing outstanding customer service.
The value of scrap metal can change daily due to market price fluctuations and you can trust us to always offer you the most competitive price.