Last month 1,200 metres of overhead copper cabling was stolen from Edmonton Green, north London, causing severe delays to city-bound trains.
Why anyone would risk cutting into wire carrying 25,000 volts might just be answered by this correspondent’s visit to a south London scrap metal merchant with a small bag of copper pipes. It yielded more than $50 cash (no questions asked) or the equivalent of more than $6,000 a tonne.
According to the Association of British Insurers, metal thefts, particularly copper, now cost the UK economy more than $1.2 billion annually.
Switch from Edmonton Green to Hong Kong this week (most would) and two new IPOs are underway for copper mining firms.
On May 17 Chinalco Mining Corp, a unit of Aluminium Corp of China which controls the Toromocho copper project in Peru, received regulatory approval to raise up to $1 billion. A couple of days before China Non-Ferrous Mining Corp, which operates four mines in Zambia, launched an offering which could raise up to $313 million.
With copper in demand for a widening range of applications, one could be forgiven for thinking the red metal is the new gold. Indeed, despite the steep rise in gold prices, investors in copper would have made similar returns over the last 10 years with prices increasing from around $1,600 a tonne in 2002 to just below $8,000 today (compared with gold’s rise from around $300/oz to a little under $1,600/oz today).
China now accounts for about 40% of global copper purchases and has long understood how its increasing demand has been driving prices. It prefers to buy its own raw materials at source rather than compete on the markets.
In 2001, the Politburo’s zou chuqu (“go out”) directive encouraged state-owned enterprises to seek long-term access to natural resources, and copper-rich Africa has attracted particular attention through a series of bilateral initiatives.
For example, the Chinese government has been investing in the Zambian copper belt since 1998 working with local authorities to make it one of a handful of African “special economic zones”.
In 2009, CIC also paid $1.5-billion for a 17.2% stake in Vancouver-based Teck Resources and Chinalco also picked up Canada’s Peru Copper for $779 million.
Then in December last year CRCC-Tongguan Investment bought Vancouver’s copper/gold specialist Corriente Resources for $549 million.
In February 2012 the Hong Kong-listed unit of state-owned China Minmetals Group completed its $1.3 billion acquisition of Canadian miner Anvil, including its Kinsevere mine in the Democratic Republic of Congo.
Similarly, in November 2011 China’s Jinchuan Group successfully bid $1.3 billion for Zambian copper and cobalt producer Metorex.
But amidst the M&A frenzy, the copper spot price has been falling, down by 11% since early February. At close to $7,800 a tonne, it is now well below its early 2011 peak of more than $10,000 a tonne.
That leads to debate on whether the recent weakness is going to be shortlived.
Paul Settles at global commodities consultancy CRU believes that stocks of copper in China are now at their highest levels ever – at 3 million tonnes – representing about 40% of China’s annual demand.
He says too that its been a turbocharged build-up: stock levels have increased by 44% in just the last 6 months.
Signs of price weakness in the industry for the foreseeable future? Perhaps that’s why China Non-Ferrous Mining bowed to sentiment this week and announced that the retail portion of its offering would be postponed.
But copper bulls have fought back by making the opposite case: that growing inventories should be seen as signs that dealers are comfortable with accumulating inventory of the red metal in anticipation of industrial demand ahead.
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