Stainless Espresso: Copper with persistent supply deficit
Stainless Espresso: Copper with persistent supply deficit

6 April 2022 – According to current forecasts, copper will remain in short supply in 2022. The deficit in copper supply could even increase dramatically by 2030. UK financial regulator scrutinises nickel incident at LME, at the same time JPMorgan announces it will take a close look at its own commodity business – coincidence? Nickel still up. And EU wants to sanction Russian coal exports.

Copper with persistent supply deficit

Global copper demand is expected to exceed production by 154,000 tonnes in 2022, analysts say. Supply could fall even further if the 4% world market share of Russian copper is also eliminated.

Historically low inventories and planned special taxes on copper mines in Chile and Peru are likely to keep the market undersupplied in the medium term. Currently, a supply deficit of about 4 million tonnes is expected by 2030 and copper demand is expected to double in the next 30 years. This is likely to keep prices rising.

JPMorgan must rethink commodity business

Do JPMorgan’s commodity traders want to escape the regulators and financial supervisors in a hurry? It certainly seems so when one hears that one of the major shareholders of the Hong Kong Exchange and Clearing (HKEX) and the London Metal Exchange (LME) wants to rethink its commodities business.

JPMorgan embroiled in nickel affair

After apparently being involved in 50,000 tonnes of Tsingshan Holding’s failed nickel deal, JPMorgan now seems to want to quickly distance itself from “metal trading and refining customers” especially in nickel and trading on the LME.

UK financial regulator scrutinises operations

On Monday, 4 April 2022, the UK financial regulators issued a joint statement saying that they were looking into the LME’s operations, including taking a closer look at companies that held significant positions in the market, to assess the effectiveness of their risk management and governance during the period under review.

It does look like frantic, almost panicky activity at JPMorgan, which could have suffered billions in losses if nickel prices on the LME had not been conveniently reset. This certainly raises deeper questions with regulators.

Developments in base metals

SHFE nickel is up a good 1.7% today. On the LME, nickel also started trading with more than 1.5%. The price of Chinese stainless steel also continued to rise today.

At the start of trading on the LME, aluminium prices are moving rather quietly sideways and there are also no major upward or downward movements on the SHFE.

Otherwise, the base metals, with the exception of nickel, seem to have priced in the somewhat stronger US dollar at the start of trading on the LME and are currently moving stably sideways at a high level.

EU wants to sanction Russian coal

Yesterday, the European Commission proposed to impose sanctions on Russian coal, as you will have noticed. The EC’s proposal has yet to be confirmed, but already seems to have met with broad approval among the EU member states.

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