TELF AG Base Metals Trends and Outlook in September 2023 – Copper and Nickel Face Challenges and Opportunities
Recent fluctuation
The base metals market has shown considerable fluctuation in recent months, particularly in copper and nickel. Understanding their market dynamics is crucial as these metals are essential to various industries, from construction to electric vehicles. This article discussed recent copper and nickel trends, focusing on price movements, inventory levels, and production, emphasizing China’s influence on these markets.
Copper: A Mixed Bag of Prospects
Copper saw some recovery on Monday morning after a sustained period of decline. As of the first week of September, the contract for copper stood at $8,366 per tonne, down 5.3% since the start of August. The decrease is largely attributed to concerns over China’s economic recovery, which have led to fears of weak demand in the country.
However, not all indicators are pointing downward for copper. Despite being under pressure from Chinese macroeconomic factors, the metal is expected to see seasonality strengthen in the fourth quarter. Coupled with the anticipation of further economic stimuli from China, there remain upside price risks for the metal.
Inventories and Production
Inventories of copper in China’s domestic bonded zones have also seen a shift, increasing by 1,700 MT to 51,000 MT as of Friday, September 8. Premiums in domestic spot markets have significantly decreased, and import profits have turned into losses, affecting trading and reducing shipments from bonded zone inventories. However, these inventories are expected to grow slightly in the near term due to the market’s limited capacity to take on more shipments.
On the production side, China’s copper cathode output in August totaled 989,000 MT, marking a 6.8% month-on-month increase and a 15.5% year-on-year growth. This exceeded expectations and continues the strong production trend observed from January to August.
Nickel: Down but Not Out
Much like copper, nickel has also been on a downward trend, declining 8.7% since the start of August. The decrease is a result of an oversupply of Indonesian nickel, reduced demand for stainless steel, and weakening growth in electric vehicle sales.
Production Momentum
Despite the decrease in prices, Chinese refined nickel output in August was 21,800 MT, an increase of 0.93% month-on-month and 40.65% year-on-year. Production is expected to continue to rise, potentially reaching 23,000 MT in September, a month-on-month increase of 0.55% and a year-on-year increase of 49.35%. This upward trend in production is expected to continue into 2023.
All in all, both copper and nickel markets are undergoing complex shifts influenced largely by macroeconomic factors, particularly those coming from China. While both metals face price pressures, each shows different strengths in terms of production and potential for future growth. As the fourth quarter approaches, stakeholders in these markets will be keenly watching how seasonality and other economic factors may alter the landscape for these crucial base metals.
