Copper prices continue to bounce back and forth within the confines of a relatively narrow range, seeking direction (Chart 1). Production growth has been strong, but demand has been as well – mainly in China, where it counts.
In September, Chinese imports spiked to a 19-month high. The recently-released data for October show that the buying cooled down a bit, with imports falling 11.2% from the previous month. Nevertheless, the average of the past the few months remains near the level of the frenzied buying days of late 2011. Chart 2 (which does not include the drop in October) shows the robust import activity that began in May.
Bonded warehouse stocks have increased a bit over the past two months, but, at an estimated 350,000 tonnes, they are still down sharply from their peak, which reportedly reached 1 million tonnes earlier this year. Official data is not necessarily the most reliable in the world. However, if the general trend of increasing imports and declining stocks is at least somewhat accurate, we can make the assumption that copper, as well as the other base metals, whose prices have been strong, are being utilized for bona fide industrial purposes.
Production growth in Chile has been somewhat disappointing in recent years, but this year has been different. Despite declining ore grades and labor issues, output has exceeded expectations. Through the end of September, Chilean output has grown 6.3% over the same period in 2012. That’s a stronger pace than the 5% growth forecast earlier this year.