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    Copper hits fresh high as supply concerns escalate
    Alex GluyasMarkets Reporter
    May 19, 2021 – 3.44pm


    The threat of tightening regulation on copper in Chile has put a rocket under the base metal’s price, driving it to a record intraday high as fears of supply disruption pervade markets.

    The latest burst for the copper price, which drove it to a high of $US10,525 a tonne overnight, stems from concerns about the introduction of a tax on copper sales and growing social unrest in the world’s largest copper producer.

    “If we see these taxes introduced, the outlook for supply will suffer because even though Chile is a well-endowed country, it produces a large amount of global copper supply,” said senior commodity strategist at ANZ, Daniel Hynes.

    “Conditions are becoming increasingly difficult for companies to operate there and that will constrain supply at a time when demand is forecast to rise strongly.”

    The proposed tax, which has already been approved in Chile’s lower house, would impose a flat 3 per cent charge on copper sales with a marginal rate that increases in line with copper prices.

    The marginal rates start at 15 per cent on sales from copper prices between $US2 and $US2.50 a pound and reach as high as 75 per cent when prices pass $US4.

    BHPBHP Group


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    Updated: May 19, 2021 – 4.39pm. Data is 20 mins delayed.
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    “Governments are starting to look at how they can benefit from this copper supercycle and Chile is moving down that track with an additional tax on sales to fund their socialist type of government spending programs which copper revenues provide for,” Mr Hynes said.

    “That is concerning for medium to long-term supply because we’re seeing copper programs struggling to get off the ground in Chile, not for lack of price incentive, but for the regulatory environment.”

    Social unrest
    Plans for the proposed tax hikes have reached neighbouring Peru, where the leading left-wing presidential candidate Pedro Castillo plans to impose a similar policy.

    It coincides with growing social unrest at BHP’s Escondida and Spence copper mines in Chile as workers demanding improved pay and working conditions also threaten to disrupt supply, and a union representing them is calling for a strike vote.

    “The pandemic has highlighted social inequalities within Chile and workers are pushing for better conditions as a result of the economic downturn COVID has created,” Mr Hynes said.

    “There’s now potential strike action emerging. That is a result of growing concerns that workers aren’t seeing the benefits of high commodity prices that we’re experiencing at the moment.”

    A combination of these factors has him concerned about new supply being deterred at a time when demand for copper is only increasing from a world looking to electrify in a decarbonising manner.

    “With the market so tight, we’re relying on Chile and Peru to meet a lot of demand and if we do start to get these taxes implemented, a lot of the projects that are looking for a financial decision in coming years will get delayed,” Mr Hynes said.

    “That then widens the black hole we are currently experiencing with not a huge amount of new supply, so we exacerbate the tightness in the short-term as demand from new sectors emerges.”

    Growing demand for the base metal is occurring against the backdrop of historically low inventory, which has only just climbed above last year’s COVID-19-affected levels.

    “Global visible copper inventories remain below historical levels but are now higher year-on-year after being below 2020 levels for the first four months of 2021,” said UBS analyst Daniel Major.

    “We expect restocking to continue, and further London Metal Exchange (LME) inventory drawdowns have the potential to create fears of physical shortage of copper near-term.”

    Racing commodity prices beginning to look ‘stretched’
    Last month, the conditions prompted Goldman Sachs to raise its forecasts for the copper price to crack $US15,000 by 2025 and although Mr Hynes is not quite at that level, he remains bullish.

    “These supply issues are boosting the case for significantly higher prices,” he said. “I get the sense that there is potentially more in this rally as both fundamentals improve and general inflows from investors continue to increase as they look to gain exposure to the sector which has been unloved for a few years.”

    ANZ has a three-month forecast o

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  2. 4.2k

    A transition to renewable sources of energy will prompt a surge in demand for base metals in the coming years, Wood Mackenzie has predicted.

    In a report published Monday, analysts at the energy consultancy said that as governments fulfil commitments to limit global warming, a growing reliance on solar power would boost demand for several non-ferrous metals.

    Three metals in particular were named by Wood Mackenzie as commodities to watch: aluminum, copper and zinc.

  3. 4.2k

    drilling see what comes ???copper

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  4. 4.2k

    drill drill good chart worth a watch imo

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  5. 4.2k

    done well more to come imo

  6. 25

    Take a bow Sandy 🤠
    Glad I followed you in on this one 😊

    1 like
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