The Copper Collective: Our Favorite Articles and Topics from July 2024

July was a mixed bag for the U.S. economy and the copper market, but there is still room for optimism in 2024 and beyond.

The U.S. only added 114,000 jobs during the month, leading to renewed recession concerns. On the flip side, there was also some optimism the Fed would reduce interest rates during its upcoming September meeting.

On the copper side, copper prices were at their highest during the early stages of the month, then gradually fell throughout the rest of the month.

But for now, the wild economic ride continues!

Industry News

• Freight theft is rising and showing no signs of stopping. Cargo security company Overhaul says cargo thefts rose 38% in Q1 2024 compared to Q1 2023. On average, each theft produces an average loss of $210,000.
• About $14.4 billion is spent annually in the U.S. to repair, rehabilitate, and replace bridges. The total cost to repair every bridge in the backlog is an estimated $125B.
• Weak Chinese demand caused copper futures to sink despite the country’s recent interest rate cuts.
• Anticipated copper shortages may lead to more collaborations between copper miners and end users like carmakers and utilities to meet green technology goals.

Second Quarter Earnings Are In…

Despite lower production, Freeport-McMoran (NYSE: FCX) exceeded second-quarter profit estimates due to higher copper prices driven by property stimulus measures and strong Chinese industrial output.

The big takeaways:

• The company reported an adjusted profit of 46 cents per share for the quarter ending June 30, beating analysts’ average estimate of 38 cents.
• Freeport-McMoran’s average realized copper price was $4.48/lb., up from $3.84 per pound in 2023.
• Q2 2024 copper production was 1,037 million pounds, down from 1,067 million pounds in Q2 2023.

Freeport-McMoran wasn’t the only mining company to release its quarterly report. Southern Copper and Mueller Industries, Inc. also announced their Q2 results recently.

Are We in a Copper Supercycle?

Supercycles occur when there’s a long-term supply and demand imbalance. But what do those imbalances look like and how do we know we’re in one, especially for the red-hot copper market?

As companies and consumers alike clamor for copper products and materials, it puts strain on supplies. Over time, less copper is available, leading to higher prices. During a supercycle, commodities often see higher stock prices and strong long-term growth.

Copper Production in the U.S.

According to GlobalData, the U.S. was the world’s fifth-largest producer of copper in 2023.

The U.S. accounts for 6% of global production – only behind Chile, Peru, the Democratic Republic of Congo, and China. U.S. copper exports are expected to grow at a CAGR of 400% between 2023 and 2027.

Shipping and Logistics🚢📦

U.S. Ports by Volume

🔴 South Carolina Ports Authority processed 180,105 total TEUs, down 16% from June. At the same time, the port of Charleston launched a new weekly ship service creating a direct connection between India and SC Ports.

🟢 Port of Virginia processed 328,682 total TEUs while handling an astonishing 57% year-over-year increase in empty containers. Both figures are way up from 2019, by 26% and 43%, respectively.

🟢 Construction projects near Port Houston are spurring growth, as the port processed 364,866 total TEUs in May. Officials say new warehouse construction and more local spending helped the port increase container volumes by more than 20% for the month year-over-year.

🟢 Port Everglades processed 87,293 total TEUs in May, up 4% year-over-year, but were about 5% less than the port processed in April 2024.

🟢 Northwest Seaport Alliance processed 214,014 total TEUs of international shipments in May, backed by more vessel calls and short dwell times. Seattle North Harbor is also the home of new COSCO and OOCL services from China to West Coast North America, and the services are anticipated to add thousands of TEUs for each call.

🟢 Jacksonville Port Authority processed 127,788 total TEUs, resulting in a 37% YoY increase in loaded imports. The port has also partnered with Ocean Network Express to move commodities from Jacksonville to India, including electronics, solar panels, food, and clothing.

Trucking Capacity

The Logistics Managers’ Index (LMI) recorded a 50 reading for capacity in June, indicating no growth since March 2022, just before the start of the freight recession. In June, the capacity subindex was 7.3 percentage points lower than in May.

For reference, anything above 50 denotes supply chain expansion, while anything below the 50 threshold marks contraction.

Packaging and Pulverizing

• Parcel demand is slumping, with UPS’s daily volume average dipping more than 3% in Q1 2024 compared to the previous year. Overall, the company’s domestic revenue in the U.S. was down about 5%.

Thermoplastics

PVC (Polyvinyl Chloride)

• U.S.: PVC prices were up leading into early June, thanks to weak inventory and higher costs due to low production. Although stateside producers have ramped up production, Chinese PVC shipments have been falling in certain areas. Additionally, increasing Chinese freight rates have made U.S. and European options more viable for importers.
• GLOBAL: Global PVC prices ticked down in June, backed by lower material and energy costs. However, higher Asian shipping costs and more PVC demand in the U.S. are complicating matters.

PE (Polyethylene)

• PE prices rose slightly in April then leveled out, bolstered by higher demand. Experts believe prices will stabilize, as demand and production return to normal.

LLDPE (Linear Low Density Polyethylene)

• U.S.: LLDPE prices rose due to higher domestic demand, including those in downstream industries. Other factors pushing LLDPE prices up were seasonality issues with the start of summer and the beginning of hurricane season on the East Coast.
• GLOBAL: Prices in Europe remained stable, but prices in Asia increased because of higher shipping costs and more U.S. demand. The market also saw delays caused by port congestion in Singapore, leading to even tighter supplies.

What We’re Listening To

Podcast | Adapt to New Supply Chain Realities

It can be a tough world to navigate right now, especially if you’re a Chief Supply Chain Officer (CSCO). In this podcast, CSCO Sami Naffakh or Reckitt talks about the many disruptions facing the supply chain and how CSCOs can work through them effectively. (19 minutes)

Interview | Why Is the Global Supply Chain So Fragile?

CBS News interviews Peter Goodman, author of How the World Ran Out of Everything, talks with CBS News about the supply chain, why it’s so fragile, and what can be done to fix it. (6 minutes)

Podcast | Copper is walloped and a strongly-opposed mine and project may both have a path to production

On this episode of Kitco Roundtable, Michael McCrae dives into the headlines rattling the mining industry — Serbia’s groundbreaking deals with the European Union and Germany, gold reaching an all-time high, and plummeting copper futures. (6 minutes) 

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