Lack of mine supply will become an 'increasing issue' for copper prices: Analyst
We've got really A2 tier growth story in China at the moment between basically the new economy, so things relating to the installation of renewable energy, the EV roll out, you know, building the power grids and all of the the kind of new economy stuff that she's really focusing on driving China's modernization versus the old economy. Things like the infrastructure build out, the housing market, Yeah, areas that we focused on for the last 20 years in commodity markets that have given us huge prices for things like iron ore especially. But those are now in contraption, right, Because she's really clamping down on China's debt issues. So big clamp down on LGFES local government spending, and that's really hurting things like the infrastructure spending. So you look at cement demand, for example, is running down double digits at the moment, whereas copper demand is still growing 3 or 4% this year because of its exposure to that green energy story. So this is quite unique for commodities. It's really the first time in 20 years where we're seeing a real divergent in the demand trends in China. It's no longer a rising tide lifts all boats. And Ian, my worry is that if that trend is structural in nature, as you point out, because as you're you're talking about it, it seems like it's more depended and that it is more to do with the rebalancing and improving the quality of growth in China. Then what does it mean for a commodity player like Australia? Yeah, so that's the key question really. It's about winners and losers there. So the infrastructure and housing, obviously massive consumers of steel and cement. So iron ore very exposed to that story, whereas metals exposed to the green energy story, especially copper, some of the other green energy metals, lithium. Longer term, they they can still see a lot of demand growth out of China in the next decade. So prices for those we still need to incentivize new mine supply, but it's really iron ore and steel which are the ones that are really suffering this year and structurally that's very much going to continue. I'm curious when we talk about things like copper, we have seen those prices coming off from those highs. I do know that there is some inventory build up over in China. I'm wondering if you see the the market is perhaps a little bit too bullish on China given sort of the market dynamics within the country, but also even what the data is telling us about the demand story. Yeah. So the the prices are kind of really looking at where is the market going, you know, in, in, in the future. And they're for once doing a job of kind of pricing ahead. And the price today looks very high on paper versus a lot of the data. But we can certainly see that we'll get there in terms of the market tightness because we know the big problem in Papa today is mine supply, right? That's really, really tight. Globally, mine's having a lot of problems. I think the biggest producer in Chile, Cadelco, just reported their lowest production in three years. There's a real lack of mine supply of copper. So China's concentrated imports last month were down double digit. Ultimately that means China will have to produce less copper in a couple of months time. So right now they've still got a lot of refined metal inventory, kind of an overhang of big production last year. But the renewable energy build out, you know, all those green stores are consuming the copper week by week and eventually those inventories will start to draw. And then with the lack of mine supply growth, then when we look at where's the copper market going to be in three to six months, it clearly looks like it's going to be very, very tight. So that's where the prices have been quite volatile recently, you know, shooting up an expectation of the tightness and then pulling back a bit. When people look at the current market and think I'm actually, you know, we're not there yet, it's not quite tight enough. But structurally, we know there's a real lack of copper coming out of the ground and and that's going to become an increasing issue.