Copper prices have started the New Year on a tear, hitting a six-month high on Tuesday. Copper for March delivery hit $4.0795 a pound, close to $9,000 a tonne, bringing gains for the first week of 2023 to more than 8 per cent.
The bellwether metal is up nearly 30 per cent from last summer's lows on optimism about China's post-coronavirus recovery and long-term demand growth spurred by the energy transition. China consumes more than half of the world's copper.
BMO Capital Markets noted in a new report that molybdenum has been one of the strongest performing base metals of late, with the latest spot assessment at around $32 a pound or $70,500 a tonne, more than 50 percent higher than its level at the end of November.
Molybdenum, often a byproduct of porphyry copper ore, is produced worldwide at 300,000 tonnes, mostly in the steel industry.
BMO says the surge in molybdenum prices is mainly driven by supply issues as demand conditions remain relatively weak due to weak production in the global steel market:
Codelco, which accounts for about 50 per cent of Chile's molybdenum supply, remains well below its five-year average due to ongoing challenges in its production, although it did return to year-on-year growth in November.
"At the same time, production in Peru is also declining year on year, while other major producers such as China and the United States are also facing production headwinds."
BMO said higher molybdenum prices should help by-product credits for many copper operations, reducing overall costs and profits for producers.
Copper stocks rallied
The recovery in copper prices has lifted the sector's top producers, led by Southern Copper (NYSE:SCCO), which is up 18.8% so far in 2023. Based in Mexico City, Southern Copper is the world's fifth-largest copper producer by output.
Freeport-McMoran(NYSE :FCX) was up nearly 4% early Tuesday afternoon on volume of nearly 9 million shares. Shares in Phoenix-based Rio Tinto, the world's second-largest copper producer after Chile's state-owned Codelco, have risen 16.8 per cent in the past week alone.
Investors in London-listed Chilean producer Antofagasta (LON:ANTO) have made double-digit gains in 2023, as have those betting on Poland's KGHM (WSE:KGH), which is up 17 per cent this year in Warsaw.
Even Vancouver-based First Quantum Mining (TSE:FM), caught in a bitter dispute with the Panamanian government over 300,000 tonnes of annual copper revenue, rose 9 per cent in 2023 as investors bet on a quick settlement.
Zijin Mining (SHA:601899,HKG:2899) is the world's ninth-largest copper producer with an annual output of about 500,000 tonnes. The company last year acquired the world's largest pure molybdenum ore, with annual production of 27,200 tonnes. Zijin Mining, which is growing rapidly, is also a major producer of precious metals. Its shares are up 8.3 per cent in Shanghai so far this year.
