There’s no shortage of copper, it’s just in the wrong place
Reuters columnist Andy Home brought his analysis on copper and the everchanging metals market to the Northern Miner podcast.
Copper may feel scarce, but the real problem is that much of the available metal is sitting in the wrong place as regional trade flows reshape a once-global market, Reuters senior metals columnist Andy Home says.
“China now finds itself short. Where does it go to buy its copper? Let’s go to the London Metal Exchange, right? So, now the London Metal Exchange stocks start decreasing. It’s caught in the middle between these two giant gravitational forces,” he told host Adrian Pocobelli on the Northern Miner podcast.
“So there’s no shortage of copper right now, but it does feel that way on the London Metal Exchange and it’ll probably feel that way in China itself,” he added.
For Home, we are experiencing a changing market reality in a metal age.
“We are moving from a period of globalized metals trading that allowed supplies to move relatively freely to wherever demand was strongest. Regional differences are becoming more important, potentially creating separate pricing dynamics across the LME, Shanghai Futures Exchange and Chicago Mercantile Exchange. Maybe we now have a world where we need three prices, right?” Home said. “It’s a new age of arbitrage if you think about it because we really have regional differences to arbitrage now, and in a globalized world we didn’t.”
He also touched on how we are now living in a metal age and how technology influenced that change.
“We’re using more metals as we decarbonize, but we’re also using more metals because the technology allows it to,” he said. “Existing demand and demand growth coming from all these wonderful new applications, that’s what we’re all investing in, right?”
Meeting that demand poses another challenge for Western economies: reducing their reliance on China after decades of shifting significant portions of the metals supply chain there.
“We basically collectively outsource the entire supply chain,” Home said. “The real western dilemma is that we are in a race but in the interim we cannot and we are not yet independent by any means of Chinese supply.”
Rebuilding that capacity domestically will require substantial infrastructure and energy investment, particularly for power-intensive processing facilities. “Going to build a new smelter in the United States will use as much energy as a city the size of Boston,” he said. “Building a smelter which requires that much power is difficult.”
Once the second phase of the project is completed, annual copper production is expected to be 550,000 tons.
