By Raul de Frutos
Copper Markets In Deficit
According to the International Copper Study Group (ICSG), the refined copper balance for the first four months of 2016 indicates a production deficit of around 119,000 metric tons (and a seasonally adjusted deficit of about 129,000 mt). This compares with a production surplus of around 13,000 mt (a seasonally adjusted surplus of about 12,000 mt) for the same period of 2015.
Stronger apparent Chinese demand caused the deficit. In the first four months, Chinese apparent demand increased by around 14% and world apparent refined usage is estimated to have increased by around 6%.
Chinese Imports Surge
In June, China imported 420,000 mt of unwrought copper and copper products, up 20.3% from June of last year. For the first half of the year, imports increased 21% compared to the same period in 2015. The growth in imports has helped support metal prices, too. However, there are different opinions on whether those imports are actual demand or just stockpiling into warehouses.
An expected, new round of infrastructure spending in China should continue to keep copper demand and China's imports strong in the second half.
So the whole metal complex is performing well. Markets appear to be in deficit (although with high stock levels looming), investors are optimistic that they'll see more stimulus coming from China and copper imports are strong. This all sounds bullish for copper prices this month, but traders seem unwilling to chase prices much higher than $5,000.
We have yet to see that bullish shift in investor sentiment in copper. Unlike other base metals, it's still early to call this a bull market.