SHFE morning trade: Copper up due to Lower production in Chile


Main Economic Events Today:

  • China Industrial Production y-o-y fell to actual 6.5%, while expected was 7.1%
  • United Kingdom Prime Minister Theresa May Speaks

This Week:

  • Empire State, Philly Fed Manufacturing for May
  • April China Industrial Production
  • Euro Zone Q1 GDP – Revised Reading
  • K. April CPI, Employment & Retail Sales
  • Japan Preliminary First Quarter GDP


Shanghai Futures Exchange

Firstly, copper prices on the SHFE recovered during morning trading on May 15. Due to the news that China had announced more funding for its One Belt One Road initiative. Copper price was as well impacted by reports of lower production in Chile.

The most-traded July copper contract on the SHFE rose 210 yuan per tonne to 45,240 yuan per tonne as of 10:59am Shanghai time.

Secondly, Chinese president Xi Jinping said One Belt One Road plan aims to connect China with Europe, Asia and Africa through various infrastructure projects.

 “The Belt and Road initiative, which was first proposed in 2013, offers the world’s second largest economy a chance to consolidate its political presence in the region. Additionally, the initiative provides China’s battered commodity intensive sectors, many of which are struggling to contain overcapacity, a lifeline to remain relevant for years to come.” (CBA Commodities)

“China has already committed $50 billion to date and that could grow exponentially in the next 5 years. The initiative, which could cost over $1 trillion, is clearly positive for commodity consumption. We note that construction will take place over decades. Realistically gather momentum in the 2020s and will inevitably face roadblocks from political interests of the 60 countries involved.”  (Metal Bulletin)

Thirdly, Cochico announced that copper production in Chile in 1H17 was down 14.6% year-on-year to 1.19 million tonnes, due to the strikes occurring during the period.

LME’s three-month copper contract was up $13 per tonne to $5,581 per tonne as of 03:55am London time.

SHFE, LME copper stocks fall 

Observing the open interest of the July copper contract, it was at around 219,134 position on Monday morning. Following, losses in the SHFE-LME arbitrage held at around $80 per tonne last week. Demand is keeping healthy levels due to the peak season. 
Also, deliverable copper stocks at SHFE-approved warehouses fell 20,238 tonnes or 9.4% week-on-week to 194,993 tonnes as of Friday May 12.
In the meantime, LME copper stocks fell by 7,350 tonnes to 329,375 tonnes on May 12.

Base metals broadly lower; Aluminium bit higher 

Fourthly, the SHFE July aluminium price rose 1.05% or 145 yuan to 13,975 yuan per tonne. Following, SHFE July zinc price dipped 0.09% or 25 yuan to 21,590 yuan per tonne.
Observing the July lead price, it slipped 1.05% or 170 to 15,965 yuan per tonne.
In conclusion, the SHFE September nickel price was 180 yuan or 0.23% lower at 76,830 yuan per tonne. And finishing with the SHFE September tin price who fell 1,240 yuan or 0.87% to 140,990 yuan per tonne. 

Currencies & data

The Brent crude oil spot price up 0.85 to $51.62 per barrel. Texas light sweet crude oil spot price also gained 0.79 to $48.59 per barrel.
Observing the Shanghai Composite, it was up 0.36% to 3.094.53. Most noteworthy, US Empire State Manufacturing Index and NAHB Housing Market Index will be released later today. The dollar index decreased 0.01% on Monday morning to 99.19.

BHP knocks down 2017 copper guidance beyond, after Escondida mine strike

Today’s Important:

  • Australia Consumer Price Index (CPI) QoQ fell to the actual 0.5% (while the expected forecast was 0.6%)
  • Canada Core Retail Sales MoM rose to actual 1.7% (even if expected was 1.1%)
  • United States Crude Oil inventories to actual – 1.034M (forecast: -1.470M)


Escondida Mine, Chile

Escondida mine strike lead to huge output reductions. The end of April will bring some changes…

Firstly, BHP Billiton cut its copper production guidance for the 2017 financial year again due to the 44-day long strike at the Escondida mine during the quarter ending March. Following a 2% reduction on its guidance in the December quarter.

The miner has now set its 2017 guidance for copper at 1.33-1.36 million tons, down from 1.62 million tons previously, it said on Wednesday April 26.
Secondly, BHP Billiton decreased its copper production  by 20% year-on-year to 939,000 tons in the quarter ending March.

The company’s share of mined copper at Escondida fell 23% year-on-year to 546,000 tons because of the strike.


Strike End

The strike finally ended on March 24. After Union N°1 decided to extend their current contract by 18 months under Article 369 of the Labour Code.

Following, BHP Billiton expects operations at Escondida will return to full capacity by the end of April.

As a result of the strike, Escondida lowered its guidance to 780,000-800,000 tons for 2017 financial year, compared with 1.07 million tons previously.

Also, the commissioning of the Escondida Water Supply project and the planned ramp-up of the Los Colorados Extension project are now expected in the September 2017 quarter.

Other copper mines

While Escondida Workers showed their dissatisfaction, it is not the only mine where the results got lower.

Observing Antamina’s copper production during the nine months ending March quarter, it fell 12% year-on-year to 95,000 tons.  While guidance for FY2017 was left unchanged at 130,000 tons.

Record mined materials was offset by lower grades and the shutdown of the concentrate pipeline due to the impact of adverse weather conditions, the company said.

Then, Pampa Norte copper output ending March quarter was down 2% year-on-year to 182,000 tons. And 2017 guidance was also unchanged and expected to be higher than the prior year.

Ending March quarter Olympic Dam copper production was down 29% to 115,000 tons. Because of the state-wide power outage during September and October 2016 and unplanned maintenance at the refinery during December 2016 and January 2017.

Guidance for the 2017 financial year remains unchanged at approximately 160,000-170,000 tons.

Lead and zinc 

BHP’s mined lead output in the March quarter was 1,308 tons, up 10% year-on-year. Nine-month output was 3,674 tons, up 20% on an annual basis.

BHP’s mined zinc output in the March quarter was 20,653 tons, up 73% from the previous year, while nine-month output was 58,426 tons, an increase of 19% year-on-year.


BHP’s mined molybdenum output for the March quarter came to 30 tons, down 87% year-on-year, while nine-month output was 48% higher on an annual basis to 816 tons.

COPPER forecasts in 2017

Cochilco, Chile’s copper commission, has raised its forecast for the price of the copper in 2017. Wanting to reflect the impact of global supply breaks. The commission anticipates copper price to average $2.60 per lb this year. Which is up from its previous estimate of $2.40 per lb.


A worker monitors a process inside the plant at the copper refinery of Codelco Ventanas in Ventanas city, northwest of Santiago, Chile

Meanwhile, according to Cochilco’s vp, Sergio Hernández, the move reflects the decline in global production. Mostly due to issues at Grasberg, Cerro Verde and Escondida mines. Amid such disruptions, Cochilco reduced its forecast for global copper production increase to 0.7% in 2017.

In the same time, Chile’s production should come in slightly below the 5.6 million tonnes of copper, which would represent a 0.8% year-on-year growth from 2016.

Earlier in January, the commission expected the global output to grow 2.9% this year.

Cochilco also said that it expects the copper price to remain at the average of $2.60 per lb in 2018.

“We believe that the construction market and the infrastructure and power projects in China will be reactivated until the third quarter of this year [2017].” Said Hernández, which should sustain the country’s demand for copper.

Cesco Copper week

There was a defnite improvement in sentiment at this year’s Cesco copper week in Chile. With more market participants seeing upside price potential amid tightening supply but many still erred on the side of caution.

Cesco Week 2017, the picture is bright if not overly bullish. The three-month price was above $5,900 per tonne last week. It was driven by a host of supply disruptions in Indonesia, Chile and Peru, which have removed some 200,000 tonnes of anticipated production from the market this year. The price has since eased back to $5,780 per tonne. It happened mainly due to rising inventories and the resolution of the strikes at Escondida and Cerro Verde and the temporary export agreement for Freeport’s Indonesian subsidiary. The next World Copper Conference will be in Santiago, Chile. It will happen 9-11 April 2018.

Shanghai Future Exchange copper inventories drop 14%

Deliverable copper stocks at Shanghai Futures Exchange-approved warehouses declined by 43,543 tonnes. In percentage: 13.8% – to 271,267 tonnes as of Friday April 14 from a week earlier.

This week, R&S Logistics MHC in Shanghai saw the biggest decrease in stocks. Exactly 26,073 tonnes of the red metal exited its sheds.

Market stockpiles dropped due to active spot trading this week. With spot premiums staying in positive territory.

Copper in the physical market was traded with a premium of 25-40 yuan per tonne. As a result of which producers intend to achieve sales in the spot market rather than deliver to SHFE sheds.The Shanghai-London arbitrage window was closed today. The SHFE copper price dropped since the start of this week, although with a brief pause on Thursday, influenced by the LME complex amid concerns over geopolitical tensions.

“The decline of SHFE copper inventory indicated that consumers are dip-buying,” noted Guotai Junan. China imported 430,000 tonnes of unwrought copper and copper-fabricated products in March, 25% lower compared with 570,000 tonnes in March 2016. Info according to preliminary Chinese customs data released on April 13.


Zinc and nickel stocks down


  • Shangai Futures Exchange zinc stocks declined 16,846 tonnes to 165,398 tonnes. Furthermore, SHFE nickel stocks was slightly down 146 tonnes to 84,043 tonnes.


All other base metals stocks increase

  • In conclusion, Aluminium stocks climbed 5,981 tonnes over the past week to 345,942 tonnes. Lead stocks in SHFE was up 212 tonnes to 72,662 tonnes. As a result, tin stocks rose from 100 tonnes to 2,119 tonnes.