The Dry Bulk Weekly Review in Shipfix Data
Copper has experienced significant price swings in recent weeks, a development that has been mirrored by the demand for seaborne transportation of the metal. Cargo order volumes during the past few weeks suggest that copper prices will remain high. While the Golden Week is likely to have been a factor, recent cargo order volumes for copper bound for China provide mixed signals for the world’s second-largest economy.
Demand for Seaborne Transportation of Copper Indicates Prices Will Remain Elevated
Copper prices experienced volatility over the past week, with sizeable price moves in both directions. The changeable conditions were partially the result of limited trading activities, as many Chinese market participants celebrated Golden Week. Also, a stronger dollar amid rising geopolitical tensions took some shine off the bullish sentiments that developed after the recent announcements that China will provide additional support for its economy. Still, despite some losses in the past few days, the three-month copper contracts listed on the LME ended Friday’s session more than ten per cent higher than a month ago.
The recent volatility is not something new, as the three-month futures for the red metal trading on the London Metal Exchange have had an eventful year so far. After trending upward during the year’s first five months, the contracts gave up much of the gains during June and July. However, the contracts have been in recovery mode over the past two months, albeit in volatile conditions.
After several months of relative stability, global cargo order volumes for copper rose in May and remained elevated for another two months. The development contributed to a better-supplied copper market and weighed on prices during June and July. However, during the past two months, demand for seaborne transportation of copper has returned to the levels seen during the year’s first four months, contributing to the recent rebound for copper prices.
After a period of declining Chinese demand for copper shipments, recent weeks have seen a tendency towards a rebound in cargo order volumes due to discharge in Chinese ports. While the week before last saw robust volumes, the development was likely an effect of the upcoming Golden Week holidays.
The recent announcements that the Chinese leadership will introduce more support measures for the world’s second-largest economy may also have contributed to the increase in a limited way. While the aggregate cargo order volumes for September represented both a month-on-month and year-on-year increase, the total nevertheless suggests that copper prices will remain elevated in the coming months.
Recent Weakness for South American Copper Exports to Weigh on Global Supplies
While China is the world’s leading importer of copper, the export market is dominated by Chile. Still, other countries, such as Indonesia, Australia, and the Democratic Republic of Congo, also export significant quantities of copper.
In recent weeks, cargo ordering activities for copper have been dominated by exports loading in South America, with Chile as the dominating origin. At the same time, demand for seaborne transportation of the red metal from other parts of the world has been limited. While the recent weak cargo order volumes suggest that copper prices will remain elevated amid tight supplies, the limited activities for origins outside of South America indicate that there could be some upside for global supplies in due course. Still, the near absence of demand for Congolese copper to be shipped from African ports could extend for some time as the region is in the middle of the rainy season. Hence, any improvement in the global supply situation depends on robust exports from South America in the short to medium term.
Volatile Weekly Cargo Order Volumes Provide Mixed Signals for China’s Economy
China imports a significant portion of the copper that crosses the world’s oceans. Given the importance of the red metal in modern manufacturing, demand for it is often seen as a leading indicator for industrial production and economic growth.
The demand for seaborne transportation of copper to Chinese ports has been volatile over the past month, with weekly cargo order volumes fluctuating significantly. Given the metal’s bellwether status, the development provides mixed signals for the outlook of the world’s second-largest economy. Still, last week’s soft demand was likely an effect of many Chinese copper buyers celebrating the Golden Week. As a result, any significant impact on copper demand from the recent news that more fiscal and monetary stimulus programs will be deployed to support economic growth has been delayed.
The Trans-Pacific exports from ports in Chile and Peru have long dominated the Chinese copper trade. While the past six months have seen significant shipments of the commodity from ports in Africa from time to time, cargo order volumes tend to be volatile for copper imported from the Democratic Republic of Congo. Given the historical importance of South American copper for the Chinese economy, an increase in the country’s demand amid more fiscal and monetary support would prove beneficial for the handysizes in the Pacific. While Chinese buyers may eye more imports from Africa to satisfy any future increase in demand, the development lies further into the future as mining operations in Congo are currently affected by the rainy season.
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