The May import figures for copper upset the applecart among commodity punters large and small.
They concentrated on the 3% fall in May from April in copper metal imports (see separate story).
The news took a lot of gloss off the metal and it had its worst week in a month in New York where the Comex price ended at $US406.56 a pound, down 1.3% on Friday and 1.9% for the week.
It was trading around $4.05 overnight Monday.
Copper inventories tracked by the LME rose for a fifth day to the highest level since May 2010.
Stockpiles monitored by the Shanghai Futures Exchange fell to near a 21-month low.
In London, copper for three-month delivery fell $US117, or 1.3 %, to $US8,938 a metric tonne ($4.05 a pound).
But the reports ignored the sharp rise in scrap imports which gives processors direct control over a cheaper raw material rather than having to go through brokers or other middlemen who may also be running a copper financing deal on the side.
Friday’s trade data showed scrap imports up 5.3% on the month to 400,000 tonnes, and 21.2% above the figure for May 2010.
Goldman Sachs remained bullish, saying on Friday in a client note that it sees a 12 month LME price of $US11,000 a tonne and expects a rise in metal imports in the third quarter.
And there was a bullish outlook given in New York last week.
Barclays Capital metals analysts Nicholas Snowden told the Metal Bulletin Global Copper Markets Forum in New York that rising demand from China and tight supply will drive copper prices to $US12,000 a tonne by the end of this year as the investment demand for copper falls away.
"We believe copper is heading to $12,000 per tonne" and will be driven there by fundamental factors such as resurgent demand from China and tight copper supply, Snowdon said in a report on Marketwatch.
He said the Chinese government’s efforts to tame inflation by reducing credit availability has cut into metal consumers’ business in the first half of this year and significantly reduced copper imports to China.
"Factory managers have used up their copper inventories without replacing them and have been purchasing copper hand to mouth," Snowdon said.
"Even that hand to mouth consumption has been enough to drastically draw down domestic stocks," Snowdon said. As this restocking cycle ends and domestic copper stocks dwindle, China will be forced to tap the global physical copper market for supply.
"By July we will begin to see a steady increase in [copper] import levels."
This uptick in copper demand, coupled with existing tightness in global copper supply, will push prices to new records.
"Investment flows are an insignificant component in price performance," Snowdon said.
And JP Morgan Chase & Co.’s head of metals research Michael Jansen was also bullish in a presentation to the same conference.
He believes the use of scrap or recycled copper will rise in importance in coming years as copper-mine production continues to disappoint consumers.
"The urban mine is the future of the copper industry," Jansen said, referring to the copper industry’s increasing reliance on recycled metal to augment copper supply.
"Every year we will be disappointed by primary mine supply," and production disruptions will remain a source of concern for copper consumers, he said in another report on Marketwatch.
"To ameliorate these concerns, copper fabricators will increasingly turn to scrap copper to substitute and augment supply.
"Scrap supply is a function of price, previous consumption and overall economic activity," Jansen said, adding that there has been "a significant acceleration in Chinese domestic scrap supply".
Copper prices will "have to stay high" to support the copper scrap market, however, "we don’t think prices will be meaningfully above $10,000 (per metric ton)," he said.
(And the rise in scrap imports into China in the past year lends support to his thesis.)
