"Copper underperformed the base metals complex over the first half of the year, trapped between the forces of speculative bearish Chinese macroeconomic sentiment and institutional fund flows on one side and strong physical Chinese demand on the other. Indeed, Chinese apparent demand showed an increase of more than 10% over the previous year to June (and remains up 7% year-on-year in July), underpinned by strong orders from the power sector and better demand from the construction sector. Over the same period, Chinese refined copper production was buoyed by strong concentrate imports. Continued global tightness in scrap supply also supported demand for cathodes. Elsewhere, demand in the other major consuming regions was slightly better than H1 2015, with European offtake up a little more than 1% while US demand growth was closer to 2% over the period. On the supply side, production has proven more steady, despite copper touching fresh cyclical lows in the earlier part of the year. During the period, the much publicised production growth in Peru came on stream, however it has been tempered by contraction in Chilean mine production, its third successive year of lower absolute production. Often unnoticed, the world’s largest copper producing country has been struggling with depleting mines and falling grades. As well as production shutdowns in the African copper belt, we have also seen contraction in Chinese mine supply. As such, we have witnessed very strong concentrate imports into China in the first half of 2016."
AVB Price at posting:
5.0¢ Sentiment: Buy Disclosure: Held
