Copper prices have been hovering either side of $3.50 a pound ($7,700 tonne) for the better part of two months, down 21% since the start of the year and nowhere near record highs touched in early March.

Slowing global growth and a strong dollar, which makes copper more expensive in the rest of the world, have undercut the bull case based on historically low inventories and robust longer term demand fundamentals.

A new report by Fitch Solutions cuts the research firm’s 2023 price forecasts for next year by double digits to $8,400 down from a previous projection of an average of $9,580 for the year.

Source: Fitch Solutions Country Risk and Industry Research

Fitch expects a small surplus on the copper market for this year, but from 2023 expects growing deficits peaking at some 9 million tonnes by the end of the decade as demand accelerates “mainly driven by consumption related to the green transition.”

Fitch says “a significant pipeline of new projects [which] will bring additional copper to the market – particularly in Chile, Peru, Australia and Canada” and also expects “a number of the key supply issues in Latin America to ease in the coming years”:

“From around 2026, however, these improvements in supply will be increasingly outpaced by demand growth from the global transition to a green economy.”

Fitch sees steady improvement to copper prices over the next five years with the metal returning to its March peaks above $10,000 in 2027 and $11,500 in 2031 as “a long term structural deficit emerges.“

Fitch points to a number of risk factors that could darken this rosy long term forecast however including further strengthening of the dollar if US monetary policy tightening accelerates, further regulation by the Chinese government to reduce commodity prices, a more stable resolution to some of the industrial tensions in Latin America and faster-than-expected uptake in copper recycling.

Equities firm MST Access believes changes to the Government of Mongolia’s mining code has the potential to benefit foreign investment with revisions to the nation’s laws expected later this year.

One of the potential beneficiaries of the proposed changes is ASX-listed Xanadu Mines that is aiming to develop its Kharmagtai copper-gold project in Mongolia.

An independent assessment by MST Access — engaged by Xanadu — expects the government’s updated mining code to be competitive with other successful mining jurisdictions.

The firm says Mongolia is seeking to attract foreign investment and lower barriers to doing business, particularly in the mining industry.

The changes are aimed at boosting in-country investment, underpinned by improving investor confidence and conviction.

MST argues the Mongolian government’s key priority is to draw in new investment prospects and ensure transitional arrangements take on board suggestions in addition to lessons learnt from existing investors.

Mongolia’s reputation as a mining jurisdiction is seen to be ever increasing in terms of resource project discovery and development, with highly prospective and under-explored geology.

The country’s potential has been highlighted by the magnitude of Xanadu’s Kharmagtai project that has a mineral resource estimate identified at a massive 1.1 billion tonnes for 3 million tonnes of contained copper and 8 million ounces of gold.

MST says that during the recent 2022 Mongolian Economic Forum in April, mining was identified as a key area of focus for Mongolia’s ‘New Revival Policy’ as part of the country’s long-term development plan — Vision 2050.

Just last month Xanadu received Australian Foreign Investment Review Board approval for Chinese mining giant Zijin to acquire shares in the company to develop Kharmagtai.

The board’s no-objection notification is the first of three approvals required for Zijin to continue its three-phase investment in Xanadu that was announced in April.

The deal still requires approval from the Chinese Government and Xanadu shareholders in order to be formalised.

However, Xanadu is confident both approvals are on track in addition to funding from the remaining two investment phases for the upcoming December quarter.

MST Access says it considered Australian FIRB approval to be of higher risk relative to the People’s Republic of China and shareholder approval and the key risk to the transaction proceeding.

According to the Australian Department of Foreign Affairs and Trade, Mongolia has the potential for major economic expansion over the coming decades with its wealth of natural resources.

In 2013 the department introduced the Australia-Mongolia Extractives Program that aims to improve government capacity to manage a vital resource for Mongolia and underlines Australia’s political and commercial interest in a well-functioning extractives sector in the country.

Xanadu has recently kicked off a new exploration campaign at the company’s highly prospective Red Mountain project in the South Gobi region of Mongolia targeting shallow high-grade gold, silver and copper.

The company has a 100 per cent share in Red Mountain where early exploration has defined broad zones of strong quartz stockwork veining and associated high-grade gold mineralisation.

The project has a 30-year mining licence and comprises an underexplored porphyry district covering about 57 square kilometres.

As the Mongolian government continues to make changes to its foreign investment framework and mining laws, companies like Xanadu appear to be in the box seat to reap the benefits.

Is your ASX-listed company doing something interesting? Contact: matt.birney@wanews.com.au

From a start guarding trains full of metal from thieves on freezing winter nights, He Jinbi built a copper trading house so powerful that it handles one of every four tons imported into China.

A born trader with an infectious sense of humor, the 57-year-old grew Maike Metals International Ltd. through the rough-and-tumble rush for commodities in the early 2000s, to become a key conduit between China’s industrial heartlands and global merchants like Glencore Plc.

Now Maike is suffering a liquidity crisis, and He’s empire is under threat. The ripple effects could be felt across the world: the company handles a million tons a year — a quarter of China’s refined copper imports — making it the largest player in the most important global trade route for the metal, and a major trader on the London Metal Exchange.

With his wide network of contacts giving enviable insight into China’s factories and building sites, He has been a poster child for China’s commodity-fueled boom over two decades — making a fortune from its ravenous demand for raw materials and then plunging it into the red-hot property market.

But this year, Beijing’s restrictive Covid Zero policies have hit both the property market and the copper price hard. After months of rumours, He admitted publicly last month that Maike had asked for help to resolve liquidity issues.

He said the problems are temporary and affected only a small part of his business, but his trading counterparties and creditors are being cautious. Some Chinese domestic traders have suspended new deals, while one of the company’s longest-standing lenders, ICBC Standard Bank Plc, was concerned enough that it moved some copper out of China that had been backing its lending to Maike.

Even if it can secure support from the government and state banks, industry executives say Maike may struggle to maintain its dominant role in the Chinese copper market.

Much as He’s rise was a microcosm of China’s economic boom, his current woes may mark a turning point for commodity markets: the end of an era in which Chinese demand could only go up.

“In some ways, Maike’s story is the story of modern China,” said David Lilley, who started dealing with Maike in the 1990s, first as a trader at MG Plc and later as co-founder of trading house and hedge fund Red Kite. “He has skillfully ridden the dynamics of the Chinese economy, but no one was prepared for the Covid lockdowns.”

This account of He’s rise to the pinnacle of China’s commodities industry is based on interviews with business associates, rivals and bankers, many of whom asked not to be named because of the sensitivity of the situation.

A spokesperson for Maike declined to comment on this story, but said in response to earlier questions from Bloomberg on Sept. 7: “Our company has been deeply involved in the development of the commodity industry for nearly 30 years. It had maintained a steady development as witnessed by everyone. It will soon resume normal operations and continue to contribute to the development of the industry and the local economy.”

Copper boom

Born in 1964 in the Chinese province of Shaanxi, He’s first encounter with copper came when he got a job procuring industrial materials for a local firm. As a young man, he was paid to guard cargoes of copper in trains crisscrossing China — which could be a cold job on freezing winter nights.

In 1993, He and several friends established Maike in the western city of Xi’an, known as the capital of China’s first emperor and the location of the iconic Terracotta Army statues. The group took out a loan of 50,000 yuan (about $7,200) to buy and sell mechanical and electrical products. But He’s early encounter with copper had made an impact, and they quickly moved their focus to scrap metal, copper wire and refined copper.

With a personable nature, a broad grin and a light-hearted sense of humor, He was a natural commodity trader whose charisma would help him build a wide network of friends and business contacts.

As China’s economy liberalized, He used his connections to make Maike a middleman between big international traders and China’s burgeoning throng of copper consumers.

In the space of 15 years, China would go from consuming a tenth of the world’s copper supply to 50%, triggering a supercycle of skyrocketing prices for the metal which is used in electrical wires in everything from power cables to air-conditioning units.

Commodities casino

This was a wild era when, for many, China’s commodity markets were little more than a casino. Groups of traders would team up to bet together, launching ambushes against their opponents on the other side of the market. The bravest players would be nicknamed after the martial art masters of popular novels.

While many traders came and went in these go-go years, He persisted.

“We did a huge amount of business together over twenty years,” said Lilley. “There were times when the Chinese metals trade was a real wild west and he stood out for his honorableness. He would always make good on his word.”

He also had another characteristic essential for a successful commodity trader: an appetite for risk.

His big break came in the early days of the supercycle. In May 2005, China’s metals industry gathered in Shanghai for the Shanghai Futures Exchange’s annual conference. Copper prices had risen sharply, and most of the producers, fabricators and traders in the audience thought they would soon fall. Even China’s mighty State Reserve Bureau had made bearish bets.

They were shocked to hear Barclays analyst Ingrid Sternby predict that copper would hit new highs as Chinese demand exceeded supply. But she was soon proved right, as prices more than doubled in the next 12 months. The SRB’s losses became a national scandal, and most Chinese traders missed the opportunity to cash in on the gains.

He was not among them. Paying close attention to demand from his network of Chinese consumers, he had built up a bullish position and profited handsomely from the global price surge.

It was a pattern he would successfully repeat many times over the years. His preferred strategy involved selling options — on the downside, at the price his Chinese customers were likely to see as a buying opportunity, and on the upside, at a price they were likely to consider too dear.

While he enjoyed some of the trappings of success, people who have known He for many years say he remained down-to-earth even as his net worth swelled to levels that probably made him, at his peak, a dollar billionaire.

In Shanghai, he would regularly have lunch at a restaurant serving cuisine from Xi’an, where he’d eat his favorite steamed cold noodles and fried leek dumplings for 50 yuan ($7).

Financial flows

The evolution of He’s business mirrored the changes taking place in the Chinese business world. Although he had started simply as a distributor of physical copper, he soon pioneered the growing interconnections between the commodities business and financial markets in China.

As Maike grew to become the country’s top copper importer, He began to utilize the constant flow of metal to raise financing. He could ask for prepayments from his end customers, and also borrow against the increasingly large volumes of copper he was shipping and holding in warehouses. Over the years, the connection between copper and cash became well established, and the ebbs and flows of China’s credit cycle became a key driver of the global market.

He would use money raised from his copper business to speculate on the exchange or, increasingly, invest in China’s booming real estate sector. Starting in around 2011, He built hotels and business centers, and even his own warehouses in Shanghai’s bonded zone.

“In some ways Maike’s story is the story of modern China”

As the state became an ever more dominant force in China’s business world, He turned his focus to investing in his hometown, Xi’an, backing projects under Xi Jinping’s Belt and Road Initiative.

This year, however, He’s empire started to wobble.

The city of Xi’an faced a month-long lockdown in December and January, and further restrictions in April and July as Covid re-emerged, hurting He’s property investments. His hotels sat almost empty for months, and some commercial tenants simply stopped paying rent.

Maike was one of a number of companies that plunged their fortunes into the property market in the boom years, said Dong Hao, head of the Chaos Ternary Research Institute. “After the sharp turnaround in real estate last year, such companies have encountered various difficulties,” he said.

Nickel squeeze

The Chinese economy’s wider malaise has also caused the copper price to slump, while at the same time Maike suffered the result of growing caution among banks toward the commodity sector in China. Trust in the industry was hurt by the historic nickel squeeze in March, as well as several scandals involving missing aluminum and copper ores.

In recent weeks, Maike began experiencing difficulties paying for its copper purchases, and several international companies — including BHP Group and Chile’s Codelco — paused sales to Maike and diverted cargoes.

The future is uncertain. He met a group of Chinese banks in late August at a crunch meeting organized by the local Shaanxi government. Maike later said that the banks had agreed to support it, including by offering extensions on existing loans.

But its trading activity has largely ground to a halt as other traders grow increasingly nervous about dealing with the company. And, in the wake of Maike’s troubles, some of the biggest banks in the sector are pulling back from financing metals in China more generally.

Within China, He’s woes elicit mixed emotions. Many mourn his situation as tragic for the Chinese commodities industry and emblematic of an economy increasingly dominated by state companies.

Others would be less sad to see the end of a business model that elevated copper to a financial asset and sometimes caused import margins to diverge from physical fundamentals.

“For many years, traders like Maike have been quite important in the importation of copper into China — they’ve bought very consistently to keep the flow of financing going,” said Simon Collins, the former head of metals trading at Trafigura Group and the CEO of digital trading platform TradeCloud. “With the property market like it is, I think the music could be stopping.”

(By Alfred Cang and Jack Farchy, with assistance from Winnie Zhu)

On September 17, Mongolia hosted a session on ‘Reimagining Learning through Digital Transformation and Partnership’ within the framework of the TES convened by the UNSG during the 77th UN General Assembly.

The session raised much interest and was attended by executives from UNICEF, UNESCO, GOOGLE, GGIA, Microsoft, World Bank Group, EdTech Hub, and government representatives from the education sectors of Indonesia, Finland, and Singapore.

It was recognized that Mongolia is one of the countries that has shifted the gears to digital learning during the pandemic and is still working hard towards a better digital education system. This progress has shown that Mongolia is ready.

Lessons learnt from Indonesia, Finland, and Singapore and advice shared by international partners reinforced Mongolia’s vision and policy on digital learning. Many partners agreed to continue providing substantial support to digital learning in Mongolia through different means. Many partners have also agreed to visit Mongolia.

Discussions were held between UNICEF and GIGA to come up with innovative options for better supporting Mongolia in its progress on expanding the digital learning opportunities in the country.

UNICEF Mongolia

Prime Minister of Mongolia L.Oyun-Erdene attended the State Funeral of Her Majesty Queen Elizabeth II of the United Kingdom of Great Britain and Northern Ireland in London on September 19, 2022, and offered condolences to the Royal Family and British People on behalf of the people of Mongolia.

Following his attendance at the state funeral, the Prime Minister signed the book of condolence at Lancaster Castle.

More than 500 Heads of State and Government, other foreign dignitaries, and members of Royal Families attended the State Funeral.

The United Kingdom was the first western country to establish diplomatic relations with Mongolia and has continually supported Mongolia’s transition to democracy.

Photo by: Rory Arnold

The good news is that daily new cases have fallen to their lowest in nearly two years. The Omicron variant – which carries more than 50 genetic mutations and is now causing a fresh wave of infections in parts of the world – ripped through Mongolia in the spring. Cases have now receded.

Today (19 September), Mongolia confirmed 34 new COVID-19 cases. 17 of them were contacts in Ulaanbaatar, and others were recorded in the regions. No imported cases were found.

The death toll from coronavirus in Mongolia remained 2,131.

Cases declined quickly, there were fewer severe cases than in previous waves and hospitals were not overwhelmed.

Mongolia has fully vaccinating over 90 percent of adults. Some 80 percent have received the first dose. So restrictions have been lifted, and much of life and business has returned to normalcy.

Urguu Maternity Hospital opened a molecular laboratory on 19 September 2022 with support of the project on ‘Safeguarding maternal, sexual, and reproductive health and rights during the COVID-19 pandemic in Mongolia’, funded by the Government of Luxembourg and executed by UNFPA.

During the opening of the laboratory, UNFPA Mongolia Head of Office Dr. Khalid Sharifi said, “Promoting access to quality maternal health and ending preventable maternal and newborn mortality are at the very core of UNFPA’s Global Mandate and Country Programme in Mongolia. The COVID-19 global pandemic has posed new challenges to maternal health, including the need for rapid diagnosis and management of infection, which continues to deteriorate the health of women during pregnancy, childbirth and postpartum. This laboratory is not just for COVID-19. It will advance the capacity to identify a number of infections that affect sexual and reproductive health leading to adverse maternal and perinatal outcomes.”

The laboratory consists of 22 types of equipment, furniture, and consumables worth approximately 350 million MNT. The laboratory equipment was supplied by LifeTronik LLC and enables molecular biology diagnostics, which has many health service applications, including early detection and prevention of STIs and cervical cancer.

Under the project on “Safeguarding maternal, sexual, and reproductive health and rights during the COVID-19 pandemic in Mongolia” two more molecular diagnostic laboratories will be established at maternity hospitals in Ulaanbaatar, which deliver services to more than 30,000 women a year.

Globally, the impact of the COVID-19 pandemic on sexual and reproductive health has been widely documented due to disruptions in supply chain management of contraceptives and delays in quality specialist care and diagnostics and early detection of maternal complications. Therefore, setting up advanced molecular biology diagnostics will improve the quality of diagnostic and treatment services to ensure safe pregnancy and delivery.

With the partnership of the Luxembourg Development Cooperation Agency, UNFPA supports the Ministry of Health’s efforts to end preventable maternal deaths and end the unmet need for family planning in Mongolia.

UNFPA in Mongolia

UNFPA Mongolia began supporting the Government of Mongolia in the late 1970s providing equipment and training to the Central Statistics Office to undertake the Population and Housing Census of 1979 – and again in 1989. Support for maternal and child health began in the early 1990s and included training for medical personnel and the provision of modern contraceptives.

The first comprehensive Country Programme between the Government of Mongolia and UNFPA officially started in 1992 and focused on the delivery of family planning services and information, and the promotion of population data usage to support the government’s development policies and programmes.

UNFPA’s 6th Country Programme in Mongolia was launched in 2017 with focus on youth participation, realizing the sexual and reproductive health and rights of youth, and addressing gender-based violence. The current Country Programme is supporting Mongolia to achieve the SDGs and is closely aligned and implemented with other UN agencies under the UN Development Assistance Framework (UNDAF) 2017-2022.

Source: UNFPA Mongolia

Korea Republic finished on nine points to take top spot with Mongolia edging Malaysia to second place on goal difference, with the East Asian side now having to wait to know whether they will advance as one of the best five runners-up to the Final.

Korea Republic 6-2 Malaysia

Korea Republic, who defeated group hosts Mongolia 7-0 on Friday following their opening 6-0 triumph against Sri Lanka, found their breakthrough in the 34th minute.

The East Asians capitalised on a poor clearance which resulted in Lee Young-Jun scoring with a volley to give Korea Republic a 1-0 lead going into the break.

Korea Republic maintained their dominance in the second half and increased their tally in the 50th minute after Bae Jun-Ho evaded his marker at the edge of the area before curling his shot past Malaysia keeper Syahmi Haikal.

Malaysia reduced the deficit in the 55th minute through Adam Farhan after the defender did well to dribble past Bae Seo-Joon at the edge of the area before slotting home from close range.

A lapse in concentration saw Korea Republic restore their two-goal advantage two minutes later after an unmarked Lee Seung-Won thumped the ball into the back of the net from the top of the box.

Despite playing with 10 men after Muhammad Shamsul’s sending off in the 67th minute, Malaysia scored their second a minute later with Aliff Izwan muscling his way into the box before firing a low drive through the legs of keeper Kim Joon-Hong.

Korea Republic, however, turned on the power with Lee Young-Jun scoring in the 75th and 82nd minutes to complete his hat-trick, before Lee Seung-Won scored their sixth from the penalty spot in the 89th minute.

There was more woe for Malaysia as they were reduced to nine men following Muhammad Farhan’s red card in the third minute of added time as Korea Republic sealed an empathic victory to book their place in the Finals.

Mongolia 6-0 Sri Lanka

Mongolia secured their first win after scoring six unanswered goals past Sri Lanka.

Temuulen Zayat opened the scoring in the second minute before goals from Buyannemekh Ganbat (42nd minute) and Temuulen Uuganbat in added time made it 3-0.

Mongolia continued to dominate in the second half and widened their advantage in the 60th minute through Sodmunkh Ankhbayar before Sodmunkh Ankhbayar and Gan-Erdene Erdenebat struck in the first and fourth minutes of added time.

The German government has taken temporary control of two subsidiaries of the Russian energy giant Rosneft.

The move by the government puts it in charge of Rosneft's stakes in three refineries in the country.

This includes a key facility in the northeast of the country which supplies around 90% of Berlin's fuel, and in which Rosneft held a majority stake.

Germany's economy ministry said the move was necessary to counteract an impending threat to energy security.

In a similar move in April, Germany took control of subsidiaries of Russian gas giant Gazprom.

On Friday, the German government handed control of the PCK Schwedt refinery in Brandenburg to the national energy regulator, along with stakes in two other refineries in the south of the country.

The economy ministry said the move was necessary because critical service providers and customers were no longer willing to work with Rosneft, putting the continued operation of the refineries under threat.

The Schwedt refinery is Germany's fourth-largest and is the main supplier of petrol, diesel and aviation fuel for Berlin and the surrounding area. Rosneft has a 54% stake in the facility.

The refinery has received all its crude from Russia via the Druzhba pipeline since it was built in the 1960s. Parts of western Poland are also supplied by Schwedt.

It's less than a year since Rosneft agreed to buy out Shell's holding in PCK, a move that would have given it more than 90% ownership of the vital Schwedt refinery.

That deal was scuppered by the Ukraine war. Now the German government has control - a symbol of the vast changes imposed on Europe's energy sector by the conflict.

In happier times, the refinery would take in vast quantities of crude brought from central Russia through the Druzbha pipeline, and pump out refined products for Berlin and Brandenburg.

But with Germany having pledged to boycott Russian oil, even though the pipeline itself is not covered by the EU's forthcoming embargo, new sources of supply will have to be found.

With Rosneft in charge that was seen as an impossible task. There were concerns in Berlin that the Russian firm would simply suspend operations at the plant, rather than use non-Russian oil.

That headache has now been removed - although it's not yet clear where alternative supplies will come from.

Rosneft Deutschland, which accounts for about 12% of German oil processing capacity, will fall under the trusteeship of the Federal Network Agency regulator, which said the original owner no longer had authority to issue instructions. The regulator was also handed control of Rosneft subsidiary RN Refining and Marketing.

"With the trusteeship, the threat to the security of energy supply is countered and an essential foundation stone is set for the preservation and future of the Schwedt site," Germany's economy ministry said.

It claimed critical suppliers such as insurance companies, IT providers and banks were no longer willing to work with Rosneft, either with the subsidiaries themselves or through the refineries.

The Federal Network Agency has also taken control of Rosneft Deutschland's shares in the MiRo refinery in Karlsruhe and Bayernoil refinery in Vohburg. Rosneft owns 28% and 24% stakes respectively.

Germany needs to stop Russian oil imports by the end of the year under European sanctions imposed over Russia's invasion of Ukraine.

The ministry said Friday's move included a package to ensure the Schwedt refinery could receive oil from alternative routes.

It is unclear who could step in to replace Rosneft as operator of the refinery. Shell, which owns a 37.5% stake in Schwedt, has wanted to withdraw for some time.

Germany said this week it would step up lending to energy firms at risk of being crushed by soaring gas prices after Russia cut supplies to Europe in retaliation for Western sanctions.

German utility Uniper said on Wednesday that the government might take a controlling stake, saying an earlier state rescue package worth €19bn euros was no longer enough.

The government has also put SEFE, formerly known as Gazprom Germania, under trusteeship after Russian energy giant Gazprom ditched it in April.