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Copper is benefitting from prospects of a supply reduction due to Covid-19 issues in Chile and signs of waning Chinese demand, strategists at ANZ Bank report.

Key quotes

“Copper extended its gains as the spread of COVID-19 in Chile continues to darken the supply prospects, not only impacting the short-term supply flows but also delaying major projects and potentially affecting the longer-term supply outlook.”

“Codelco suspended construction work at its largest mine, El Teniente. Other major miners have revised their guidance as well, and uncertainties are still looming. These supply disruptions saw the forward curve flipping into backwardation for the first time in a year.”

“The tighter concentrate market is weighing on treatment charges. Chinese smelters set a floor for treatment fees for the third quarter at USD53/t from USD67/t. That said, stockpiles of the refined metal at SHFE have risen for the first time in seven weeks, leaving a clue that Chinese demand is waning.”