However, prices of the metal used widely in the power and construction industries are down 8% since touching a record high of US$10,747.50 a ton earlier this month.
“The USD is giving some support to copper, but overall the mood is negative,” one metals trader said. “Still, the market did need a breather and consolidation.”
China’s market regulators warned industrial metal companies to maintain “normal market order” during talks on the significant gains in metals prices this year.
China’s government also said last week that it would manage “unreasonable” price increases for commodities such as copper, coal, steel and iron ore.
Some concern about supplies on the LME market has narrowed the discount for cash copper over the three-month contract to about US$14 a ton from US$28 last week.
Supporting copper is political uncertainty in Peru and top producer Chile. An overhaul of Chile’s market-orientated constitution is under way and the country is debating whether to increase royalties on miners.
Peru, the No. 2 producer, is heading for a polarized June presidential election. Leading in the polls is a little-known socialist who wants to redistribute mining wealth.
A likely surge in reviewable energy demand, particularly windmills is set to drive a surge in copper demand. It is estimated that the quantity of copper required per wind turbine is staggering at 63,000 pounds.
A week ago, price of the basic metal surged to a record high because of supply chain disruptions. By the end of the week it had cooled off on efforts by China to rein in the commodity market rally.
Now copper price is on the way up again, and this is likely to be a steady trend. The reason for this is renewable energy—and more specifically wind energy. Offshore wind turbines require 8 tons of copper for every megawatt of generation capacity. According to data from the International Energy Agency, “An average turbine of 3.6MW will contain close to 29 tons of copper.”
This upward trend in demand for copper will only intensify in the coming years as the world expands its renewable power generation capacity. It is likely to be supported by the constant threat of a supply disruption like the one in Chile that spurred the latest reversal in copper’s fortunes.
Earlier, copper price rebounded by concerns of supply disruptions in Chile and signs that Chinese demand is picking up.
Workers at BHP Group’s remote operations center in Santiago rejected the company’s final wage offer, with almost 97% of the union’s members opting to strike. Under Chilean labor rules, BHP now has the right to call for five days of government mediation. Meanwhile, demand in top user China is recovering after prices retreated, Jinrui Futures Co. said in a note, pointing to a spike in the domestic spot premium.
Bets on tight supplies and rising use have fueled a year-long rally in copper, which touched an all-time high before gains ebbed. The risk of a strike poses an added threat to output from the top copper-mining country, which already faces a potential giant tax hike. A proposal to tax Chilean copper sales at rates of as high as 75% is rippling all the way to Peru, where the leading presidential candidate wants to impose a similar measure.
“LME metals have started the new week on a firmer footing amid a slew of news stories,” Ed Meir, an analyst at ED&F Man Capital Markets, said in a note. “We are watching copper in particular; we learned that a union representing workers at BHP’s Escondida and Spence mines rejected an offer on a future contract, raising the risk of a strike at these sizable facilities.”
