Copper Price in a Flat Zone over Mixed Sentiments

As seen lately, Copper price is remaining flat with bulls going marginally up amid mix sentiments in the global market over the future of the red metal. Primarily, the Benchmark LME copper has been trading in a narrow range of $6450 – $6580 per tonne (as seen in past few days). This range of copper is marking a sluggish movement over ambivalent indication from the global economic indicators.

For example, the China Manufacturing PMI (Purchasing Managers Index) marked a level of 49.2 for February 2019 as compared to the level of 49.5 reported in January 2019, which indicated the sluggishness in the manufacturing sector as the value again remained below the mean value of 50. However, the manufacturing index combined with the Caixin Manufacturing PMI supported the copper price to some extent.

The Caixin Manufacturing PMI marked the value of 49.9 and moved closer to the mean value of 50 for February 2019, as compared to previously reported 48.3 for January 2019. The combination of both the Manufacturing index on an average pulled the manufacturing activity closer to the mean of 50 and thus, in turn, supported the commodity price to some extent.

Caixin Manufacturing PMI (Source: Thomson Reuters)

Along with the supporting numbers from China, the U.S. indicators marked some recovery and supported copper price. The U.S. Advance GDP was up 2.6% (quarter on quarter) in the fourth quarter, while the market participants were expecting it to be around 2.2%. The higher than estimated advancement in the GDP figures further boosted the market optimism over the betterment in the U.S. economy and supported the copper price.

Then, market also saw the Chicago PMI for February 2019 that marked a rise to 64.7 as compared to the market expectation of 57.3 and previously reported 56.7.

A fall in China Manufacturing PMI combined with a rise in Caixin Manufacturing PMI is somewhat supporting the copper and bulls are taking control over building optimism. However, the GDP numbers reported are still less than what was seen in the previous corresponding period; thus, market participants are reacting apprehensively on the prices, and in turn, preventing the up-rally in copper. On the supply side, Chile, the world’s number one copper producing country marked a year-on-year decline in the production and thus creating a supply constraint.

Chile Copper Output Y/Y (Source: Thomson Reuters)

Chile copper production marked a decline in January 2019, as compared to a rise of 4.3% in the previous corresponding period.

The market participants are eyeing the falling production closely and economic and political development in the Democratic Republic of Congo (DRC) before taking any leap forward. The DRC for its political and ethical issues is losing its status as a major metal producing country and more and more LME registered warehouses are seeking clarification from the producers that are placing their metal sourcing from DRC.

The ongoing talks between the U.S. and China to bring a resolution on the long-standing trade war is further stabilising the market scenario and building optimism over the betterment of the global economy.


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