June marked the start of summer for the United States, but news coming out of China seems to be turning up the heat.
Copper market prices have been dropping from May’s high mark due to fears of weak copper demand in China. But even with a recent uptick in demand, prices are still on a downward trend.
Although the world’s copper supply was in a surplus earlier this year, some experts say we’ll soon see demand outpace production.
Sounds like a good time to buckle those seatbelts!
Can the world’s largest copper producer reverse a production slump, even as it struggles with a $20 billion debt pile?
In 2021, Chile’s state-run Codelco produced about 1.618mn metric tonnes of copper, a far cry from the 1.325mn metric tonnes it mined in 2023 — its lowest total in 25 years.
Rubén Alvarado, who became chief executive in September 2023, said in a recent interview, “We believe 2023 was the year we bottomed out… In 2024, we will be slightly higher than in 2023, and by 2030, we will reach 1.7mn metric tonnes.”
The Manufacturing PMI registered 48.7% in May, down from the 49.2% recorded in April.
But why?
Manufacturing growth has plateaued as the Federal Reserve declines to lower interest rates. Until interest rates fall, companies remain hesitant about making large-scale investments.
Manufacturers hope the Federal Reserve could begin lowering interest rates later this year, particularly in Q4.
Moving to the seas, Maersk has revised its profit forecast, saying congestion in the Red Sea has had a larger-than-expected impact on global supply lines, boosting freight rates.
Problems in the Red Sea have also led to congestion at some ports in Asia and the Middle East as shippers look to alternate routes.
Finally, spending in the manufacturing sector has ballooned since the CHIPS Act was signed into law in August 2022. View the manufacturing construction projects across the U.S. here.
Since the CHIPS Act became law, companies have invested roughly $866B into manufacturing projects, including several major projects in New York, Texas, Arizona, Idaho, and Ohio.
Top commodity trader Pierre Andurand expects copper to reach astronomical new heights, including $40,000/ton, in the next four years. Currently, the reddish metal is trading just shy of $10,000/ton but did see a high of $11,000/ton in May.
Andurand told the Financial Times that copper demand could double thanks to renewable energy, global electrification, and the need for more data centers.
If the analyst is correct, prices could surge in the coming years as supply lags behind demand.
Recent surges in copper prices have brought startling growth in the number of trucks carrying copper from illegal mines in Peru, jamming roads, causing accidents, and creating hazardous conditions.
In May alone, there were at least 11 reported accidents involving artisan or illegal trucks moving copper along partially paved roads. As many as 120 trucks from these companies have been using the roads daily.
Chinese copper exports hit a record in May, doubling from the previous year to nearly 150,000 tons, topping the previous high reached in 2012.
Although exports of unwrought copper and products have steadily increased over the past decade, some wonder if this might be the start of something bigger.
Chinese demand has slowed recently, forcing smelters to find buyers overseas. At the same time, some buyers may be stockpiling copper out of concern for higher demand and prices that could come.
Annual electricity spikes during the summer months make it harder for the grid to keep up with our daily needs, eventually leading to reliability issues.
Although electricity sales could are projected to increase by 2.7% year-over-year this summer, more demand isn’t the only concern. Renewable energy, especially wind and solar, has introduced new complications.
Needless to say, we must improve the electrical grid’s reliability and capacity. But how do we fix a system with hundreds of thousands of miles worth of lines?
Read the rest of the story here!
May spot prices for ocean shipments from Asia to North America are approaching $5,000 per 40-foot equivalent unit, Freightos reported.
The cause is tied to Red Sea conflicts and labor uncertainty at East Coast ports affecting market dynamics.
Meanwhile, Northwest Seaport Alliance handled 196,476 total TEUs for international shipments in April, up 13% from the previous year and a slight month-over-month increase.
The transportation industry saw 247,930 new entrants in 2021 but is slowing down. In 2022, the number of new entrants fell to 214,101, before sliding to 169,235 in 2023.
“We’re not obviously done with ’24, but we’re on a trajectory that suggests that we’re at least about to maybe break even with ’23,” Consultant Dave Lazarides said.
Frock Freights’ recent webinar revealed that most shippers anticipate transportation spending increases of up to 10%, driven by a rebalancing of supply and demand.
Packaging manufacturers disclosed in May more than 600 workers would be impacted by closures and layoffs, citing production shifts and other economic reasons.
The layoffs are tied to several large companies and impacted workers in Iowa, Connecticut, New York, Michigan, Tennessee, Illinois, and Ohio.
CNBC recently took viewers behind the curtain to see how Rio Tinto’s Kennecot mine operates. It was a fascinating opportunity to learn more about the copper producer and the challenges the industry is facing.
The mine, located outside Salt Lake City, produces about 200,000 metric tons of copper annually. (11 minutes)
Podcast | Reining in Those Rising Logistics Costs
Total logistics costs rose by as much as 80% over the past year.
Are shippers in for more of the same in the coming months? Bob Bowman, Editor-in-Chief of SupplyChainBrain, shares his thoughts. (20 minutes)
Documentary | Why Global Supply Chains May Never Be the Same
In this documentary, WSJ navigates the complex movement of goods underpinning the global economy and how it’s far more vulnerable than many imagined. (55 minutes)
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