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Copper gave up all of its 2023 gains in May as LME inventories begun to recover and industrial activity remained subdued in key markets like China. Despite the recent uptick in inventories, copper output, relative to demand, is likely to remain in a deficit for 2023. This should add to constriction in copper’s long-term supply outlook.

A key problem area for global copper output continues to be Peru. MRP has covered issues within Peru’s government and its impact on the country’s critical position in the copper market since 2021. Output growth from its copper mines has become so strangled that Chile may soon be surpassed as the world’s second largest producer. Many projects have been announced to remedy the stagnation in Peruvian copper, but most continue to face delays and red tape.

Related ETN & ETF: iPath Series B Bloomberg Copper Subindex Total Return ETN (JJC), Global X Copper Miners ETF (COPX)

In May, copper’s spot price gave up all the gains that it accrued since the start of the year, with futures falling to near 7-month lows around $3.50 per pound toward the end of the month. Though prices have regained some ground in the past few days, the London Metal Exchange’s (LME) most recent Commitments of Traders Report indicates investment funds have turned net short of its copper contract for the first time since June 2020. Reuters reports that this balance compounds bearish copper positioning already present in the Chicago Mercantile Exchange’s (CME) contract.

Even as copper stocks on the LME have trended lower, touching a near 18-year low of 51,175 tonnes in April, the metal has been unable to gain its footing. That’s largely due to subdued industrial activity across the world – and particularly in China. A rebound in LME inventories throughout the month of May helped to push copper even lower still. As of April, the International Copper Study Group (ICSG) expected a supply shortfall of 114,000 tonnes this year, a sharp reversal from their October 2022 forecast for an annual surplus of 155,000 tonnes.

A key problem area MRP has flagged for the global supply of copper is Peru – the world’s second largest producer of the metal after its neighbor Chile. Years of political strife devolved into violent unrest in the streets earlier this year, following the…

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