Fresh Oversupply Worries Jolt Copper
April 27 2018 - 3:09PM
Dow Jones News
By Amrith Ramkumar and David Hodari
Copper prices fell Friday on worries that the market will
continue to be well supplied, limiting future gains.
Front-month copper for May delivery shed 2.2% to $3.0460 a pound
on the Comex division of the New York Mercantile Exchange -- its
worst day since Feb. 7. Prices had risen in four-straight weeks
entering this one but have tumbled of late and are down 7.1% in
2018, after hitting a nearly four-year high late last year.
Investors are worried that the supply disruptions that buoyed
prices last year from mining labor contract renegotiations and
other conflicts with host governments haven't materialized yet in
2018, meaning the market could continue to be well supplied.
On Friday, the International Copper Study Group said it now
expects a small supply surplus in 2018, after previously projecting
a deficit
"The switch to surplus is due to stronger than previously
anticipated growth in refined copper production," the group said in
a statement with its latest forecasts.
Traders were also reacting to news from U.S. giant
Freeport-McMoRan Inc. that its latest spat with the Indonesian
government regarding control over the world's second-largest copper
mine, Grasberg, hasn't yet affected production. Indonesia recently
said it wanted Freeport to meet new environmental standards in just
six months, the latest barb in an extended back-and-forth between
the two sides.
Another prominent copper producer, Norilsk Nickel, said Thursday
that first-quarter copper production rose 18% from a year
earlier.
Still, some analysts expect the uncertainty surrounding
Freeport's negotiations with Indonesia and labor negotiations at
the BHP Billiton-operated Escondida mine in Chile to boost copper
moving forward as consumption data from China, the world's largest
consumer, picks up steam.
Long-term investors have also been encouraged by the lack of
growth projects that could boost copper supply in future years, and
the ICSG reiterated Friday that it expects a supply deficit in
2019.
Elsewhere in base metals, aluminum for delivery in three months
on the London Metal Exchange declined 2.3% to $2,223 a metric ton,
continuing a recent bout of extreme volatility after news that
Russian billionaire Oleg Deripaska has agreed to sell down his
majority ownership in EN+ Group PLC, the U.K.-listed holding
company that owns 48% of aluminum giant United Co. Rusal.
Prices surged Thursday on a Bloomberg report that Mr. Deripaska
wants to keep control of the company, potentially creating a
standoff with the U.S. government and further disrupting global
supplies.
The U.S. has said it might relieve sanctions if Mr. Deripaska
sells his stake. Rusal denied the report was accurate, and some
analysts think it is a negotiating tactic by Mr. Deripaska to
pressure the U.S. or get a better deal if he sells.
The U.S. has hinted it would relieve sanctions if Mr. Deripaska
sells his stake. Rusal denied the report was accurate, and some
analysts think it was a negotiating tactic by Mr. Deripaska to
pressure the U.S. or get a better deal on a sale.
Worries about supply tied to Rusal has jolted the aluminum,
palladium and nickel markets this month, but some analysts expect a
resolution to calm traders moving forward. Nickel on the LME
dropped 2.5% Friday, while the most-actively traded palladium
futures in New York shed 1.6%.
Among precious metals, front-month gold for May delivery inched
up 0.4% to $1,320.30 a troy ounce from its lowest close in more
than a month. Prices have fallen recently with the dollar rising,
as a stronger dollar makes commodities denominated in the U.S.
currency more expensive for overseas buyers.
Write to Amrith Ramkumar at amrith.ramkumar@wsj.com and David
Hodari at David.Hodari@dowjones.com
(END) Dow Jones Newswires
April 27, 2018 15:54 ET (19:54 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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