There’s no shortage of copper, it’s just in the wrong place
Reuters columnist Andy Home brought his analysis on copper and the everchanging metals market to the Northern Miner podcast.
Copper may seem scarce, but the actual issue lies in the metal being in the wrong location, according to Reuters senior metals columnist Andy Home. "China is currently facing a shortage. Where does it go to purchase its copper? Well, to the London Metal Exchange, right? So, now the stocks on the London Metal Exchange are decreasing," Home explained on the Northern Miner podcast.
"So, there's no shortage of copper right now, but it does feel that way on the London Metal Exchange and it will likely feel that way in China itself." Home believes we are experiencing a shift in the market reality of metals trading. "We are moving from a period of globalized metals trading that allowed supplies to move relatively freely to wherever demand was strongest.
Regional differences are becoming more important, potentially creating separate pricing dynamics across the LME, Shanghai Futures Exchange, and Chicago Mercantile Exchange. Perhaps we now require three prices," he said. Home also discussed the current metal age and how technology has played a role in this change. "We're using more metals as we decarbonize, but we're also using more metals because the technology allows it to," he remarked.
"Existing demand and demand growth from new applications are what we're all investing in, right?" Meeting this demand presents a challenge for Western economies, as they need to reduce their dependence on China after decades of outsourcing significant portions of the metals supply chain. "We collectively outsource the entire supply chain," Home stated.
"The real western dilemma is that we are in a race, but in the interim, we cannot and we are not yet independent by any means of Chinese supply." To rebuild this capacity domestically, substantial infrastructure and energy investment, especially for power-intensive processing facilities, will be required. "Building a new smelter in the United States will use as much energy as a city the size of Boston," he noted. "Building a smelter that requires that much power is challenging."
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