COMMENT: What we learned in Asia Copper Week

We learned a host of things in Asia Copper Week, but spotted one matter that still needs resolution.

  • Aluminium is being substituted for copper in China’s power cable sector as a result of the red metal’s high prices and volatility.
  • Establishing LME warehouses in China may take time as it involves a tug-of-war among different departments, and approval by the China Securities Regulatory Commission
  • Glencore-Xstrata plans to be the largest copper company in the world and expects to produce 2 million tonnes in 2016
  • Chile needs to resolve energy problems or it will create issues in the coming decades for the mining industry. “We represent 33% of the world’s copper production and China has 42% of the world’s copper consumption so it’s important for China that Chile solves its energy problems,” Joaquin Villarino, president of the Chilean Mining Council said.
  • Brokers such as Sucden Financial will be hiring in Asia as they look to expand their business there.
  • China’s growth story will continue, even if the GDP will not see the double-digit growth of past years. The mid- to long-term outlook is positive, and there will be lots of infrastructure projects and government urbanisation plans, with airports and roads that need to be built, Bonnie Lui at Macquarie said. “We do see an uptick of recovery but not as strong as in the past few years,” she said.
  • The destocking phase of China’s copper consumption cycle has probably ended, Liu said, in a well-attended and mildly bullish presentation on Chinese copper demand.
  • The liberalisation of the Chinese market and the London Metal Exchange’s plans for warehouses in China are going to be closely watched issues.
  • Fund investment in the copper market totals about $8 billion, with the money mainly tied up in CTAs and index funds, according to Sucden Financial’s Jeremy Goldwyn.
  • If you’re a large copper producer, the maximum unhedged exposure to LME copper you want is half a lot.
  • The Shanghai Futures Exchange will open a night market next year, allowing investors to play the arb into the European session. As if brokers in Asia don’t work long enough hours...

And, finally, something that we couldn’t learn much about, at all. Everybody was talking about the TC/RCs benchmark. But has anybody looked sideways, at other markets? The iron ore benchmark went; the quarterly ferro-chrome settlement is under pressure. Could more TC/RCs be settled on the basis of a spot index? And will more producers look to move their customers on to spot deals and thence an index, to mitigate arguments about price and enable both sides to focus on quality and deliveries?

Alex Harrison
Twitter: @alexharrison_mb 


December 03, 2012

18:16 GMT