Upstream Share Discussion Threads

[master rsi] 09/4/2024 14:05

Karelian Diamond Resources reveals promising analysis results

(Sharecast News) - Karelian Diamond Resources revealed promising results from the electron microprobe analysis of Kimberlitic garnets extracted from till samples on Tuesday.
The AIM-traded firm said the samples were taken up-ice of the location where it previously discovered a notable green diamond.

It said the analysis suggested proximity to the source of that distinctive gemstone.
Renaud Geological Consulting in Canada carried out the examination, conducted on 60 garnets from various locations,.

Karelian said the findings unveiled 19 'G10' harzburgite, 19 'G9' lherzolite, 15 'G5' pyroxenite, and seven 'G4' eclogitic garnets.
Notably, the presence of diamond stability field garnets alongside other diamond-facies garnets indicated the potential for diamond-bearing kimberlite in the Kuhmo target area.

Furthermore, a conventional CaO versus Cr2O3 contents plot for the 60 garnets analysed confirmed their derivation from the diamond stability field of the Earth's mantle.
Those results strongly suggested a deep-mantle source for kimberlite, originating from the diamond stability field where diamonds form.

Of particular significance were two sample locations - A5-23-01 and A5-23-03 - which appeared to be in close proximity to the kimberlitic source of the green diamond.
That finding could hold substantial implications, as coloured diamonds, such as green ones, often fetch prices significantly higher than colourless diamonds.

[master rsi] 09/4/2024 13:51

UPS

KEFI 0.564p ( 0.55 v 0.578p )

Plenty of volume and in the rise after the drop after the placing at 0.60p last month. All the metals have been on the rise lately. Real prices sales at 0.551 and buys at 0.5629p.
----------------- Intraday ------------------------------------------ 2 months ------------------------------- 1 year -------------------
INDICATORS

[master rsi] 09/4/2024 13:04

MARKET REPORT
LONDON MARKET MIDDAY: FTSE 100 treads water despite boost from miners

(Alliance News) - Equities in London lacked impetus heading into Tuesday, as investors moved with caution ahead of a US inflation print on Wednesday and the European Central Bank's interest rate decision a day later.

The FTSE 100 index was down just 0.46 of a point at 7,943.01. The FTSE 250 was up only 2.80 points at 19,857.38, and the AIM All-Share rose 2.93 points, 0.4%, at 751.76.

The Cboe UK 100 was up 0.1% at 794.61, the Cboe UK 250 was up 0.1% at 17,303.03, and the Cboe Small Companies was up slightly at 14,698.89.

In European equities on Tuesday, the CAC 40 in Paris was down 0.6%, while the DAX 40 in Frankfurt was 0.7% lower.

"European markets showed signs of nervousness ahead of the European Central Bank's interest rate decision later this week," said Russ Mould, investment director at AJ Bell.

"Forecasts imply the ECB will hold rates at 4.5% yet last week's stronger than expected US jobs data and the ongoing strength in the oil price have raised expectations that the Federal Reserve will push back rate cuts until later in the year, and this has subsequently spooked investors into thinking other central banks including the ECB will also sit on their hands for now."

The ECB will announce its interest rate decision on Thursday.

Before that, there is a consumer price inflation reading in the US.

The data is expected to show that the rate of US annual consumer price inflation picked up to 3.4% last month, from 3.2% in February, according to FXStreet cited consensus.

If the rate of consumer price inflation picks up by more than expected, it could mean the Federal Reserve will re-think its interest rate outlook. In its last set of economic projections, the dot-plot showed three rate cuts were still the best bet for 2023.

SPI Asset Management analyst Stephen Innes said the inflation reading "is arguably the most critical economic print of the year".

The pound was quoted at USD1.2686 at midday on Tuesday in London, higher compared to USD1.2652 at the equities close on Monday. The euro stood at USD1.0869, rising against USD1.0854. Against the yen, the dollar was trading at JPY151.78, down compared to JPY151.82.

In the FTSE 100, miners were up at midday. Fresnillo, Anglo American and Rio Tinto rose 4.9%, 2.4%, and 2.1%, respectively.

"Mining stocks have benefitted from rising iron ore prices amid speculation that demand will improve from Chinese steelmakers. The Chinese government is eager to stimulate the economy and there is a hope that its initiatives will feed through into greater steel activity, with iron ore a key raw material," AJ Bell's Mould explained.

Oil firms BP and Shell rose 1.7% and 0.8%, respectively.

Shell fired a warning shot to that it could be prepared to move its listing to the US in a fresh blow to London's financial centre.

Shell's Chief Executive Wael Sawan said the company is looking at "all options" for its listing amid concerns it is under-appreciated by investors, according to a Bloomberg report.

"I have a location that clearly seems to be undervalued," he remarked, referring to London.

On Tuesday, BP said upstream production in the quarter ending March is expected to be higher compared to the prior quarter, with output higher in oil production & operations and slightly higher in gas & low carbon energy.

But in the gas & low carbon energy segment, lower gas prices compared to the prior quarter are expected to have an adverse impact in the range of USD200 million to USD400 million, BP said.

Brent oil was quoted at USD90.51 a barrel at midday in London on Tuesday, up from USD89.93 late Monday.

In the FTSE 250, JTC jumped 5.4%.

The Jersey-based professional services business reported that revenue in 2023 climbed 29% to GBP257.4 million from GBP200.0 million a year earlier.

However, pretax profit fell 33% to GBP24.3 million from GBP35.9 million.

On the back of the results, JTC proposed a final dividend of 7.67 pence per share, a rise of 11% from 6.88p a year prior. This brought the total payout for 2023 to 11.17p, up 12% from 9.98p the year prior.

Among London's small-caps, ProCook jumped 7.5%.

The company on Tuesday predicted annual profit to be "marginally" ahead of market expectations, shaking off "subdued" economic conditions.

The Gloucester-based kitchenware company reported revenue of GBP13.2 million for the fourth quarter for the year ended March 31, a rise of 4.8% on-year. It would mean full year revenue of GBP62.6 million, an increase of 0.4% from the previous year.

On AIM, Surface Transforms plummeted 30%, after the company said it is continuing to remedy production problems at its Liverpool site and announced a delay to the publication of its 2023 financial results.

Stocks in New York were called mixed to open largely higher. The Dow Jones Industrial Average was called down slightly, but the S&P 500 index and the Nasdaq Composite are seen opening up 0.1%.

Gold was quoted at USD2,362.70 an ounce, lower against USD2,330.93. Gold hit a new record high on Monday, above USD2,350 per ounce, before easing back.

ActivTrades analyst Ricardo Evangelista commented: "Gold prices hit a fresh all-time high during early Tuesday trading, driven by a surge in haven demand. Iran's explicit threat of military retaliation following Israel's targeting of its Syrian embassy has escalated tensions, amplifying the spectre of a broader regional conflict with potentially unforeseeable repercussions. Concurrently, the ongoing conflict in Ukraine exacerbates investor anxieties.

"Against this turbulent backdrop, the imminent release of US inflation data and the latest FOMC minutes on Wednesday loom large, poised to either fuel the gold frenzy or temper its ascent, depending on the clues they may leave regarding the Federal Reserve's anticipated timing for its first rate cut."

[master rsi] 09/4/2024 12:29

How the UPS are performing during last month

[master rsi] 09/4/2024 12:04

How the UPS are performing today

[master rsi] 09/4/2024 11:47

REE 1.75p (0.625 / 55.56%%) Altona Rare Earths shares soar as strikes Botswana asset deals

(Alliance News) - Altona Rare Earths PLC on Tuesday said it has struck a deal to acquire an up to 85% stake in a copper and silver asset in Botswana.

Altona Rare Earths shares jumped 60% to 1.80 pence each in London on Tuesday morning.

The Africa-focused resource exploration and development company has entered into an agreement with Ignate African Mining PL to acquire an interest in the Sesana project.

The company will acquire the interest for a consideration of USD110,000 in cash and USD250,000 in Altona shares, paid over four years in three tranches.

The licence covers an area situated on the Kalahari copper belt, host to some of the regions largest untapped copper and silver deposits.

Recent airborne geophysical data further validated the project's potential after identifying areas of prospective mineralisation.

Altona Chief Executive Officer Cedric Simonet said: "The acquisition of the Sesana project is in line with the implementation of Altona's portfolio diversification strategy."

The company expects the project to generate flow at a relatively low cost to complement its recent acquisition of the Kabompo South project in Zambia and its flagship Monte Muambe project in Mozambique.

[master rsi] 09/4/2024 10:49

TERN 3.55p +0.45p / Tern investee reports "substantial interest" from industry leaders

(Alliance News) - Tern PLC on Tuesday announced that one of its investee company's had a strong start to the year.

The London-based 'internet of things' technology investor owns a 24% stake in healthcare intelligence company Talking Medicines Ltd.

Talking Medicines, an industry pioneer leveraging advanced data science and artificial intelligence, reported record revenue bookings in the first quarter of 2024.

The company also made improvements to its Drug-GPT platform which aims to revolutionise access to intelligence on diseases and pharmaceutical brands.

Talking Medicines said: "This innovative technology has garnered substantial interest from leading global healthcare advertising agencies, who recognise its potential to transform strategies for pharmaceutical clients."

Looking ahead, Talking Medicines stated that it remains committed to driving innovation and improving healthcare decision making.

[master rsi] 09/4/2024 10:29

Pantheon Resources up after upgraded estimates for Alaskan project

(Alliance News) - Pantheon Resources PLC on Tuesday said the company is increasingly confident following the conclusions of a report conducted by analysts from Netherland Sewell & Associates Inc.

Pantheon is an oil and gas company, focused on developing the Ahpun and Kodiak onshore oil fields in Alaska, US. Pantheon shares were up 16% to 39.63 pence each in London on Tuesday morning.

A successful bid in December allowed Pantheon to acquire an additional 66,240 acres at Ahpun and Kodiak. With the issue of leases expected in the summer, the company will therefore obtain a 100% working interest in the 193,000 acre site.

The Netherland Sewell report, which took into consideration 43,000 of the new acreage, subsequently upgraded resource estimates by 25% to 1.2 billion barrels of recoverable liquid.

Pantheon Technical Director Bob Rosenthal said: "The potential upside is vast - NSAI recognise a high estimate in excess of 2.8 billion barrels of recoverable marketable liquids and nearly 12 trillion cubic feet of recoverable natural gas."

NSAI also estimated an 8% higher average recovery rate due to improved reservoir properties, such as greater porosity and permeability, on the newly acquired land.

[master rsi] 09/4/2024 09:53

Darktrace launches products as artificial intelligence threats rise

(Alliance News) - Darktrace PLC on Tuesday announced the launch of its latest ActiveAI Security Platform.

The Cambridge, England-based cybersecurity company's new platform aims to help organisations improve their security operations and shift to a focus on proactive cyber resilience from one of threat detection.

Chief Product Officer Max Heinemeyer said: "Security teams are reaching a breaking point, forced into a reactive state by too many alerts, too little time, and a fragmented security stack."

This focus on resilience is made possible with an array of new features and innovations unveiled today designed to free security teams by providing greater visibility, eliminating alert fatigue, and highlighting security gaps.

In addition to this, Darktrace announced new features for its email service which will prevent early-stage phishing and spot compromised accounts more efficiently.

These improvements to the product range follow a report commissioned by the company which surveyed nearly 1,800 security leaders and practitioners across 14 countries.

It revealed that 74% of respondents believe AI-augmented cyber threats are already having a significant impact on their organisations, and 60% feel they are currently underprepared to defend themselves from such attacks.

The arrival of further features for the ActiveAI Security Platform is expected over the coming months.

Darktrace shares were down 0.6% to 438.29 pence each in London on Tuesday morning.

[master rsi] 09/4/2024 09:15

Gresham Technologies to be bought by STG Partners in £147m deal

(Sharecast News) - Gresham Technologies said on Tuesday that it has agreed to be bought by Alliance Bidco - a company owned indirectly by funds managed or advised by US private equity firm STG Partners - in a £146.7m deal.

Under the terms of the acquisition, Gresham shareholders will be entitled to receive 163p per share in cash. This is a premium of around 26.9% to the closing share price on Monday.

STG will combine Gresham with its portfolio company, Alveo, which was acquired in January last year with the aim of building "a global and differentiated" enterprise data management and governance platform for the capital markets tech ecosystem.

Gresham chairman Richard Last said: "We believe the cash offer provides a good opportunity for Gresham shareholders to realise fair and certain value and an exciting way for Gresham to compete more effectively in its global markets and to continue the Clareti journey started over a decade ago."

Marc Bala, managing director at STG and a director of Bidco, said: "We couldn't be more excited about bringing together two leading financial technology providers and leveraging the respective strengths of each company to drive greater value for our combined customers.

At 0900 BST, the shares were up 25% at 161.80p.

[master rsi] 09/4/2024 08:53

BREAKOUT

BOOM 277.50p + 12.50p

The stock has gone over the Previous intraday high, There was resistance around 270p

[master rsi] 09/4/2024 08:42

GOLD
Keeps rising now $2353 +14, Silver also higher

Intraday ---- Gold -------------- Silver ---------------- Copper -----


1 month ----- Gold ---------------- Silver --------------- Copper -----

[master rsi] 09/4/2024 08:27

FTSE

Opening well down with 50 points but now only 5 points lower

[master rsi] 08/4/2024 23:59

BOOM

All is well moving ahead

[master rsi] 08/4/2024 22:45

Broker tips:
Wood Group is "on the right track" with its turnaround, according to Berenberg but the broker still cut its target price for shares of the energy and materials engineering and consulting business following the group's recent results.

The broker has reduced its target for the shares from 180p to 150p and kept a 'hold' rating on the stock after the company's 2023 results last month. The figures were broadly in line with forecasts, but free cash flow (FCF) is now expected to stay negative for 2024, while net debt was slightly higher than guidance.

"While we recognise that Wood is implementing a turnaround, we would like to see several quarters of improved delivery and better cash generation before we become more confident in the outlook," Berenberg said. "With moderate expected revenue growth and positive cash generation delayed by another year, we continue to see opportunities elsewhere across our coverage."

While the German bank acknowledged that the valuation isn't expensive, it predicts only a "limited likelihood of a re-rating" until the wider market becomes confident of Wood Group's FCF generation.

RBC Capital Markets has said it sees a buying opportunity at IWG after a recent underperformance in the shares, keeping the workspace solutions group at 'outperform'.

The broker said it still sees upside from the current level of 186.8p (as of last Friday's close) and kept a 215p target price for the stock, saying that the risk-reward balance was "in favour, especially given the recent pullback from 200p".

"We upgraded the stock at the start of the year and the rationale still holds: IWG has started hitting expectations, and we believe consensus forecasts look achievable, even in the current macro environment," RBC said in a research note.

"There is genuine evidence that the business is moving to a capital-light model - this should have implications for growth over the next few years as the 1k+ locations signed over the last two years ramp up and perhaps more importantly for cashflow, as it coincides with high depreciation from the 2016-19 expansion phase. Unlike peers, services are also now a meaningful chunk of the business."

The broker said there was a "clear opportunity" for IWG to establish itself as the largest independent global marketplace for flexible working, and it could "monetise part of all of the business over time".

[master rsi] 08/4/2024 21:58

MARKET REPORT
LONDON MARKET CLOSE: Miners and airlines in demand as FTSE 100 climbs

(Alliance News) - Investors bought in London on Monday, as the FTSE 100 rose with gold hitting a new high before fading, airlines and miners were in demand, while Entain prospered on bid speculation.

The FTSE 100 index closed up 32.31 points, 0.4%, at 7,943.47. The FTSE 250 ended up 128.64 points, 0.7%, at 19,854.58, and the AIM All-Share closed up 8.78 points, or 1.2%, at 748.83.

The Cboe UK 100 ended up 0.5% at 794.13, the Cboe UK 250 closed up 0.8% at 17,288.54, and the Cboe Small Companies ended up 0.1% at 14,693.06.

The brighter mood was reflected in Europe. The CAC 40 in Paris closed up 0.7% while the DAX 40 in Frankfurt climbed 0.8%.

Across the pond, stocks in New York were mixed at the London equities close, with the DJIA slightly lower, the S&P 500 slightly higher, and the Nasdaq Composite up 0.1%.

On Wednesday, US inflation figures will be released.

The report is expected to show that the rate of US annual consumer price inflation picked up to 3.4% last month, from 3.2% in February, according to FXStreet cited consensus.

Last Friday, strong jobs data tilted appeared to tilt the balance against a rate cut at June's FOMC meeting.

According to the Bureau of Labor Statistics, nonfarm payroll employment rose by 303,000 in March, higher than the FXStreet-cited consensus of 200,000.

The figure for February was revised down by 5,000, from 275,000 to 270,000 while January's total was adjusted upwards by 27,000, from 229,000 to 256,000. This means employment in January and February combined was 22,000 higher than previously reported.

Nonetheless, the CME FedWatch tool places a 51% chance that interest rates will be lowered by 25 basis points in June, albeit lower when compared to 57% this time a week ago.

The pound was quoted at USD1.2652 at the London equities close on Monday in London, up from USD1.2621 late Friday. The euro rose to USD1.0854 from USD1.0831. Against the yen, the dollar rose to JPY151.82 from JPY151.54.

Gold hit a new record high on Monday, above USD2,350 per ounce before easing back.

Gold was quoted at USD2,330.93 an ounce on Monday at the London equities close, up from USD2,325.89 late Friday.

UBS thinks the gold price has further to run in 2024 despite its strong start to the year.

UBS explained it had previously expected gold to rise to USD2,250 per ounce by the end of the year.

"But it has rallied faster and more forcefully than our already bullish expectations," the broker noted.

The Swiss bank increased its forecasts by USD250 per ounce, expecting gold to trade at USD2,300 per ounce in June and at USD2,500 per ounce at end-2024 and end-March 2025.

The move in the price supported gold miners Fresnillo in the FTSE 100, which rose 2.6%, and Hochschild Mining, which led the FTSE 250 risers, up 5.4%.

Other mining stocks prospered with Rio Tinto up 4.2%, Anglo American up 3.2% and Glencore up 1.9%.

Elsewhere, in London's FTSE 100, Entain climbed 4.7% after The Sunday Times reported it was considering its options for a number of assets, reigniting bid speculation.

The bookmaker, which owns Ladbrokes and Coral, has called on investment bank Moelis to help with a review of its brands, the report claimed.

The future of "a whole range" of assets are under consideration, The Sunday Times reported, citing sources.

The Sunday Times said that a number of buyout firms, including the likes of Apollo Global Management Inc and CVC Capital Partners, are watching on with interest. The latter already has a hand in the gambling market, as it owns German bookmaker Tipico.

Entain has previously been the subject of failed bid attempts from MGM and Draftkings.

DS Smith closed down 0.3%. Sky News reported International Paper is closing in on a formal GBP5 billion-plus bid for the paper and packaging group.

A recommended offer from the US-based predator would still leave the door ajar for Mondi, DS Smith's London-listed rival, to trump the International Paper bid, Sky said.

Both International Paper and Mondi have made all-share bid propositions for DS Smith.

A barrel of Brent oil fetched USD89.93 at the London equities close on Friday, down from USD91.31 on Thursday.

The respite in the oil price helped support shares in airlines easyJet, up 3.3%, and IAG, the owner of British Airways, up 2.3%, on hopes of lower fuel bills.

easyJet was given an additional push by UBS which reiterated a 'buy' rating and raised its share price target to 850 pence each from 820p.

In London's FTSE 250, shares in Currys gained 1.1% after The Sunday Times reported a shareholder has called on the consumer electronics seller to dispose of its mobile phone service division.

Fund manager JO Hambro said Currys should sell ID Mobile, a business which provides monthly phone contracts, the report claimed.

The Sunday Times said the division is valued at around GBP350 million.

JO Hambro holds a 4.5% stake in Currys and is the eighth-largest shareholder in Currys, the newspaper noted.

In March, Elliott Advisors announced it will not make an official bid for Currys, after having made a roughly GBP750 million proposal. JD.com, another potential bidder for Currys, also said it would not be making a bid.

On AIM, Mirriad Advertising leapt 37%. The provider of in-content advertising technology struck a deal with TripleLift, an operator of supply-side digital advertising platform.

As part of the pact, TripleLift will facilitate automated selling of Mirriad's in-content advertising inventory into leading media buying platforms such as Google's DV360.

In Tuesday's UK corporate calendar, Imperial Brands releases a trading statement.

The economic calendar week has consumer and producer price inflation data for the US out on Wednesday and Thursday respectively, while inflation figures for China and the latest European Central Bank interest rate decision are also out on Thursday. On Friday, German CPI is out, alongside UK gross domestic product data.

[master rsi] 08/4/2024 21:34

DOW

finishing 11 points lower

[master rsi] 08/4/2024 16:52

How the UPS are performing during last month

[master rsi] 08/4/2024 16:29

How the UPS are performing today

[master rsi] 08/4/2024 16:17

Why Copper and Iron Prices Are Diverging?
Prices of copper and iron ore diverging quickly with copper prices surging above $9,000/t, while iron ore is trading closer to the $100/t level.China’s concerns over the ongoing property crisis have weighed on the iron ore market, while copper benefits from rising demand for electric vehicles (EVs) and renewable energy.

While traditional demand drivers, such as property and construction, face headwinds, demand from the green energy sector continues to grow, and iron ore doesn’t benefit from that.

This divergence is likely to deepen as China’s economy undergoes a major transition towards 'high-quality growth' and Beijing pursues new growth drivers in sectors including clean energy and high-tech manufacturing. The property sector makes the bulk of steel demand but so far there have been little signs of massive fiscal stimulus by Beijing in the construction and property sectors. It appears more focused on the 'new three' growth drivers: EVs, batteries and solar panels.

Copper is used in everything from EVs to wind turbines and power grids. In EVs, copper is a key component used in electric motors, batteries and wiring, as well as charging stations. Copper has no substitute for its use in EVs, wind and solar energy, and its appeal to investors as a key green metal will continue to support higher prices over the next few years.

Last year, rising demand for renewables and EVs in China already offset the slump from the more traditional sectors like the property market, and we expect this shift in demand drivers to continue this year.

The surge in copper prices has also been driven by unexpected supply constraints, in particular the closure of Canada’s First Quantum mine in Panama. The Cobre Panama copper mine was one of the world’s largest sources of copper, accounting for around 1.5% of global copper output.

Iron ore slumps on disappointing demand
Iron ore has sold off more than 20% this year, with prices dropping below $100/t to their lowest since August. The fundamentals are deteriorating; steel demand in China continues to disappoint, and the gloom in the country’s property sector drags on. Although China’s overall manufacturing activity rebounded in March, its steel industry PMI remained in contraction territory.

China’s steel industry PMI dives further into contractionary territory

As for China’s property slowdown, the country’s new home starts – the biggest steel demand driver – fell sharply in 2023, down by more than 20%. This should continue to suppress steel demand this year. Property makes up most of China’s steel demand. Futures for reinforcement bars, a key construction product, recently hit the lowest level in Shanghai since 2020, signalling the country’s property crisis is dragging on.

The government has so far held off delivering a big enough stimulus package to revive China’s ailing property sector. The usual increase in construction activity in the spring has also failed to materialise, and iron ore and steel inventories are climbing.

Iron ore inventories in China surged 24% in the first quarter – the biggest three-month increase in percentage terms since 2014. China’s iron ore port inventory is a key indicator that reflects the supply and demand balance, as well as the safety net and imbalance between the iron ore supply and the steel mill demand. With the seasonal uptick in demand not yet materialising, the drawdown in stocks might be delayed. We believe high iron ore availability in China will continue to put pressure on prices.

The China Iron & Steel Association recently called on domestic steel mills to “reduce production intensity” as the property downturn and slowdown in the infrastructure sector delay steel demand recovery.

Downside risks are likely to prevail in the near term for iron ore prices amid subdued steel demand. China will continue to drive iron ore prices going forward, and the supply and demand balance will largely depend on China’s steel demand outlook. A further boost for China’s property sector will be crucial in supporting demand. We see prices averaging $100/t in Q2 with a 2024 average of $106/t.

Copper rallies on tightening supply
This slump in iron ore prices contrasts with copper, which is trading at its highest since the middle of 2022, up 10% so far this year, fuelled by supply risks and improving demand prospects for metals used in the green energy transition.

The main catalyst for copper’s rally is the unexpected tightening in the global mine supply, most notably First Quantum’s mine in Panama, which has removed around 4000,000 tonnes of the metal from the world’s annual supply. In addition, Anglo American (JO:AGLJ) said it was cutting output by 200,000 tonnes. And Codelco, the world’s biggest copper producer, is struggling to recover from the lowest output in a quarter of a century.

Most recently, Ivanhoe Mines reported a 6.5% quarterly drop in output at the Kamoa-Kakula mining complex in the Democratic Republic of Congo.

Copper smelters in China have pledged to curb output in response to a tightening copper ore market and following a collapse in spot treatment and refining charges to record lows. Spot charges in China plunged to $2.30/t last week, according to weekly data from Fastmarkets. They are now down more than 95% since the beginning of the year.

The drop in treatment charges reflects not only the tightening concentrates market but also the rapid expansion in copper smelter capacities in China. China’s strategic need for copper has driven this expansion as demand from the green energy sector continues to grow. Last year, China’s production of refined copper surged 13.5% year-on-year to 12.99 million tonnes, according to data from the National Bureau of Statistics (NBS (LON:NBS)).

The global refined copper market was expected to be fairly balanced this year, but the shortfall in mine supply now means that the market is likely to be in a deficit. The extent of this deficit will also depend on the scope of Chinese smelters' production curbs and how quickly Chinese copper demand will pick up in the second quarter, which is seasonally the strongest for copper demand.

Hopes for a global recovery in demand this year are also supporting copper, with manufacturing activity picking up globally. In China, the official manufacturing purchasing managers’ index expanded in March for the first time since September.

Manufacturing activity is picking up
Copper prices have also been lifted by the nearing end of the Federal Reserve’s interest rate tightening cycle. Elevated rates and a stronger dollar have been a drag on industrial metals over the past two years.

Looking further ahead, copper prices will be supported by a weaker US dollar on the back of Fed easing. Copper will benefit from looser monetary policy, which will alleviate the financial strain on manufacturers and construction companies by reducing borrowing costs.

However, with the latest US jobs data for March surged past estimates, the prospect of a June rate cut from the Fed looks slim.

If US rates stay higher for longer, this would lead to a stronger US dollar and weaker investor sentiment, which in turn would translate to lower copper prices.

Copper should benefit from looser monetary policy
At the same time, demand uncertainties remain. China’s property market has been a major headwind for copper demand for the past year. A continued slowdown in the sector remains the main downside risk for the metal. However, while housing starts were down more than 20% last year, completions, the key source of copper consumption, have been rising. This could provide additional support for copper prices in the future.

Completions are the key source of copper consumption
In the short term, the upside to copper prices might be capped by macro drivers, including ongoing demand concerns in China and lingering uncertainty over US monetary policy.

However, micro dynamics are starting to look more constructive for the metal amid a tightening supply outlook. We see copper prices rising in the second quarter, which is seasonally the strongest for copper demand, to $9,050/t on average from an average of $8,539/t in the first. They could peak in the fourth quarter at $9,100/t. That said, the market will remain volatile as it's exposed to macro drivers, not least from US interest rates and Chinese policies.