Theme of the Day: Glencore’s market views

Copper: Coming into 2024, China Smelters Purchasing Team (CSPT) set its Q124 buying guidance at $80/t & 8c/lb for TC/RCs, however continued growth in smelter capacity, together with mine supply underperformance in late 2023, resulted in spot TC/RCs moving to their lowest levels in nearly 15 years. Due to prevailing tightness for concentrates, CSPT revised its Q124 buying guidance to $50/t & 5c/lb in Jan, and did not set buying guidance for Q224. Spot TC/RCs for China smelter buying have remained in the low single digits since Mar, a stark contrast to the 7-year high reached in Oct 2023. Looking forward, we continue to expect mine supply growth to be constrained by aging assets, a diminished project pipeline and geopolitical factors, with new projects likely to experience delays. In the near term, global demand sentiment continues to be dependent on the outlook for, and implications of, fiscal policies and stimulus measures taken by China to support its economic growth. In the longer term, demand is expected to be driven by population growth and anticipated rising living standards in emerging economies, supported by climate change policies and decarbonisation measures, which are expected to result in increased copper usage, given its role in accelerating the renewable energy transition, from renewable power generation and distribution, to energy storage and electric vehicles.Nickel: Strong supply growth, mainly from Indonesia, and related processing into metal and other finished forms continued to exceed nickel demand growth, keeping the physical market in surplus. At current prices we estimate that a large portion of global nickel production is operating at negative margins, with significant closures already announced. This is in addition to a period of heightened supply disruption, including from slower approvals of Indonesian mine permits and unrest in New Caledonia. Nickel demand remains robust, with an estimated growth of 5% this year, supported by increased usage in many battery types and strong stainless output, especially in China.Zinc: Zinc prices exhibited support over H124, reflecting current tightness in the concentrates market, the potential for additional disruptions in supply, and visible metal stocks continuing to linger below historical averages. Global zinc demand growth remained relatively steady, driven by Chinese buying, with net imports of zinc metal at 180kt Jan-May 2024, supported by a positive arbitrage. European demand has likely bottomed, showing signs of a nascent recovery, while North American demand remained healthy. In the concentrates market, the 2024 annual TC benchmark was agreed at $165/dmt, down $109/dmt (40%) from 2023, with no price participation. This reflected tight concentrate availability, due to mines previously put into care and maintenance and underperformance year-to-date from existing mines. This shortage was compounded by increased metal production capacity, due to smelter restarts in Europe and capacity expansions in China. Published spot TCs fell from an average of $238/dmt in H123, to $53/dmt in H124, recently being reported at record low levels (range from $Nil to $20/dmt for Jun 2024), with premium qualities trading as low as minus $30/dmt.