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CESCO INTERVIEW: Copper market amply

supplied, despite disruptions – Luvata exec
April 14, 2015 - 12:26 GMT Location: Santiago, Chile
The copper market is amply supplied despite some issues constricting supply, and looks likely to remain so in
the short-to-medium term, according to the senior vp of metals at Luvata.
Ian Scarlett told Metal Bulletin that this is in part because Chinese demand for cathode has slowed, leaving
more material available as a result.

"We acknowledge the supply constraints and disruptions have been a little bit higher than people had
forecasted; however, supply has still risen at a higher level than demand is increasing at this point in time," he
said in at interview in Santiago during the annual CESCO week.

"China has disappointed in terms of its cathode offtake, with lower imports, so the market is well supplied in
terms of copper at this point. Will it continue to be? Our view in the short-to-medium term is yes," he added.

Expectations of a large market surplus over the course of this year have been trimmed following a series of
production disruptions caused by issues including strikes, droughts, fires and floods. Lower copper prices have
also weighed on smaller miners, while lower grades have led to slippage in forecast production at some sites.

Copper prices have dropped by about 10% over the past year, but the market is currently "fair-valued", Scarlett
said. There is even some further potential room on the downside for lower prices, he noted.

"The investment community is not generally finding commodities very appealing, and are generally neutral
towards investing in commodities," he said.

"But at some point things will change, and that's when [the investment community] will have a big influence on
the copper price," he said.

It is tricky to gain any visibility into the "opaque" world of the Chinese hedge funds, Scarlett said, adding that
these funds had had a significant impact on prices in past months, particularly at the start of the year.

"What is clear is that access to the London Metal Exchange copper market has been widened and we can
expect more volatility or large price moves in the future as access is given to financial players who previously
hadn't had access," he added.

Like futures prices, copper premiums are soft, and Scarlett said they can potentially go lower.

"Spot premiums are reflecting quite well the state of supply in the market but we're not naive enough to think
they'll be soft forever," he added.

The softer premiums also come as the market has grown more used to the LME's new rules governing its

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CESCO INTERVIEW: Copper market amply supplied, despite disruptions... http://www.metalbulletin.com/Article/3444568/Search/CESCO-INTER...

network of approved warehouses, which were brought in to reduce queues to access metal.

Luvata, which has been a strong supporter of changes to the LME rules in order to mend what it described as a
broken system, believes the regulations are doing their job.

"The LME has done a good job in confronting the issue. It's put in some proposals and measures that will and
have helped," Scarlett said.

"I think they have further ammunition to change things if the market continues to be distorted through
warehousing, but everything that we've seen in the last twelve months has been in a positive direction. As an
industrial user of copper, we see at this time that the warehouse issues are not distorting the market," he added.

To view all of Metal Bulletin’s articles on LME fees, click here.

To view all of Metal Bulletin’s articles on China’s metal funds, click here.

To view all of Metal Bulletin’s articles on warehousing, click here.

Andrea Hotter
ahotter@metalbulletin.com
Twitter: @andreahotter

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