Copper Hits Fresh 2-Year High on Possible China Scrap Ban

By Anjli Raval, David Sheppard, & Tom Hancock – Re-Blogged From Financial Times

The Red metal is a key source of income for some of the world’s biggest mining companies. Copper jumped to its highest level in two years on reports that China could ban imports of scrap metal by the end of next year — a move that would probably boost demand for refined metals in the world’s top importer.

Copper for delivery in three months on the London Metal Exchange rose as high as $6,400 a tonne on Wednesday, a level not seen since May 2015, having risen by about 5 per cent over the past two sessions. In afternoon trading, it moderated its gains to $6,316 a tonne.

Used in everything from wiring to power grids, copper was also aided by weakness in the US currency, which makes the commodities priced in it cheaper for non-dollar buyers. The metal is a key source of income for some of the world’s biggest mining companies including BHP Billiton, Freeport-McMoRan, Glencore and Southern Copper.

China is the world’s biggest consumer of the metal, buying about 50 per cent of global supply. Reports on Wednesday claimed that the recycling branch of China’s non-ferrous metals association had received a notice that imports of scrap metal including electrical wire, motors and bulk scrap metal could be barred next year. Shanghai Metals Market (SMM), a Chinese metals information service, said it had confirmed from officials that a ban on imports of scrap copper across seven categories would be introduced as early as the end of 2018.

The China Nonferrous Metals Industry Association, the industry body, did not respond to a request for comment. Scrap played an important part in keeping a lid on prices this year when supplies from the world’s two biggest copper mines, Escondida in Chile and Grasberg in Indonesia, were halted because of a strike and an export ban respectively.

SMM data showed China imported about 1.2m tonnes of scrap copper last year and that is expected to rise to close to 1.27m tonnes in 2017. Of that amount, almost two-thirds, or 750,000-900,000 tonnes will fall under the new ruling. Copper had received a further boost this week after Freeport-McMoRan, the world’s biggest publicly listed copper miner, lowered its sales guidance because of a labour dispute at its giant Grasberg pit in Indonesia. The company blamed a shortfall in supply on lower mining rates and reduced manpower at the world’s second-biggest copper mine.

Daniel Briesemann, an analyst at Commerzbank, said speculation about better economic prospects for China in recent days had also bolstered prices. However, Mr Briesemann said he was not as optimistic, citing fresh warnings from China’s President Xi Jinping about growing risks in the country’s financial sector.

“We have a more cautious stance on China as new measures implemented by the authorities could in fact slow demand — for example, the moves to cool down the overheated property sector,” he said. “We expect less investment into infrastructure”, he said, as tightening credit conditions could limit metals stockpiling. Even so, higher prices will be a big boost for miners such as Anglo American, Glencore and Freeport-McMoRan that seek to generate extra cash to pay down debts and which plan to restart dividend payments to shareholders.

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