The political crisis in Peru gives fever to the copper market

Published on : 17/11/2020 – 22:28

With a new interim president, Peru is beginning to emerge from a political crisis that caused copper prices to jump earlier this week. Blame it on the fear of a paralysis of Peruvian production of red metal, while orders from China are picking up again.

The political crisis in Peru has given fever to the copper market, a tonne has exceeded $ 7,000 on the London Metal Exchange, a high for almost two and a half years and a rebound of over 50 % since the low in March.

Peru, second largest producer in the world

The Latin American country is the world’s second largest producer of red metal, behind Chile. However, the demonstrations threatened to slow down the logistics of this industry, while the Covid-19 has already severely cut mining production for lack of manpower. Peru is the country most affected by the pandemic in terms of per capita mortality. Peruvian copper exports have already fallen by 18% between January and September.

Scarcity of copper concentrate

Even though copper concentrate for close delivery is becoming scarce on the planet right now. Global copper stocks are down 25%, historically low. Because China imports record quantities of red metal: 5.6 million tonnes since the start of the year, unprecedented, despite the brakes caused by the Covid-19.

Strong demand for wind power in China

The rebound in construction, automobiles and household appliances are stronger than expected in China and investments in renewable energies, in particular wind power, are massive, yet this is the sector where the demand for copper progresses the fastest.

New copper contract in Shanghai

China already consumes more than half of the world’s red metal. And it intends to further orient the prices of this commodity by launching, Thursday, November 19, 2020, in Shanghai, the first Chinese copper futures contract that will be open to international investors and not just to Chinese traders. A contract that could be a benchmark in the Asian region, but not yet at the global level, as long as the Chinese currency, the yuan, is not freely convertible.

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