Commerzbank Commodities Radar October 2021

Commodities radar at a glance

Source: Bloomberg data

Copper overheated

Copper has rallied since its COVID-19-related lows in 2020, reaching record highs of nearly US$10,750 in May 2021. Whilst the price has since fallen by approximately US$1,500, at over US$9,200 it is still at a high level. We have not yet seen any sustained correction, with dips quickly recovered – for example in August, when the price briefly dropped to the lowest levels seen in months.

The International Copper Study Group (ICSG) recently reported that so far this year the copper market has been sufficiently supplied. 2020 also began with a market surplus, which then turned into a very high supply deficit of more than 500,000 tons during the course of the year. That is not expected to happen this year, according to ICSG at its spring meeting at the end of April, the reason being that China bought more copper than needed last year and is now adopting a rather cautious stance. In recent months, the high prices have already deterred numerous Chinese buyers. Customs authority data show that copper imports in August fell for the fifth month in a row: for the first time in more than two years, less than 400,000 tons per month (394,000 to be exact) were imported. Last year Chinese traders took advantage of low copper prices, making very substantial purchases and importing significantly more than 700,000 tons per month in the summer of 2020.

Copper price in USD per tonne

If one assumes that eased lockdown measures positively impact the copper demand, that should also apply to the supply. Production was expanded accordingly over the past months (+3% according to ICSG data) and more copper concentrate, for example, is available. Whilst Chilean mining companies are still struggling to increase production above last year’s levels, Peru, Indonesia and African countries have succeeded in doing so. Industry experts are expecting the mining supply to grow by more than 2 million tons per annum over the next two years. The market needs this additional supply to absorb expected higher demand, mainly in the area of electrification. However, it could also lead to the global copper market being sufficiently supplied – or even oversupplied – by 2023. Higher treatment and refining charges are evidence of already increased mining production and should provide an incentive for smelters to produce more refined copper. Following the COVID-19-related supply chain collapses last year, the amount of copper scrap available for processing is expected to materially recover in 2021. The world’s largest copper recycling company is anticipating a healthy scrap supply over the coming months.

Whilst these prospects have not yet been enough to seriously put the copper price under pressure, we remain convinced that the price is too high and thus expect a correction to US$9,000 per ton by the end of the year. Consumers may wish to consider to take advantage of this or even lower price levels to hedge their needs. Over the medium to long term, we expect the copper price to rise due to good demand prospects – especially when taking future technological developments such as e-mobility and 5G into account – because the supply will prove insufficient in perspective.

Source: Commerzbank Research, as of: 09/30/2021

The year’s price highs and lows at a glance

in EUR per unit in EUR per unit
Precious metals Agricultural products
Gold per troy ounce High
Low
1,651.83
1,415.30
Cocoa per mt High
Low
2,282.36
1,752.41
Palladium per troy ounce High
Low
2,483.71
1,604.54
Cotton per pound High
Low
0.93
0.55
Platinum per troy ounce High
Low
1,076.02
726.38
Maize per mt High
Low
320.00
170.75
Silver per troy ounce High
Low
24.07
18.56
Rapeseed per mt High
Low
681.25
377.50
Sugar per pound High
Low
0.17
0.12
Wheat per mt High
Low
273.50
196.75
Industrial metals Energy
Aluminium per mt High
Low
2,504.71
1,449.55
Brent Crude Oil per barrel
High
Low
67.96
32.17
Copper per mt
High
Low
8,646.82
5,427.63
Coal per mt
High
Low
188.96
42.76
Iron Ore per mt High
Low
186.10
96.30
Diesel per mt High
Low
587.35
259.75
Lead per mt High
Low
2,131.81
1,472.60
Electricity per MWh
High
Low
160.68
33.67
Nickel per mt High
Low
17,282.77
12,179.01
EUA per tonne High
Low
64.37
23.21
Tin per mt High
Low
32,484.64
14,690.51
Gasoil per mt High
Low
584.44
260.77
Zinc per mt High
Low
2,664.73
1,957.24
Jet Fuel per mt High
Low
609.48
262.85

* Source: Bloomberg data, period: 01/10/2020 - 30/09/2021

** From the perspective of German companies, the listed commodities are generally priced in a foreign currency. For this reason, currency risks need to be considered in addition to commodity price risks.

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