How Is The Needle Moving On Copper?

  • Apr 12, 2019 AEST
  • Team Kalkine
How Is The Needle Moving On Copper?

Copper prices are moving upwards, with COMEX copper future moving from the level of $2.543 (January 2019) to the level of $2.987 (in March 2019). The prices are currently hovering around the level of $2.938.

The factor which supported the copper prices in the international market includes a fall in inventory across the registered warehouses of the London Metal Exchange and the high demand from the electric vehicle segment.

The demand for the copper marked a rise amid rapid electrification in the electric vehicle segment and the application of copper in the construction of electricity storage battery, which in turn led the copper prices to surge.

On the supply side, the LME registered warehouses marked a sharp decline in the inventory amid production decline from many miners across the globe and a strike in the Escondida mine in Chile, which is among the top producer of the metal. Many miners who operated in the Democratic Republic of Congo (DRC) faced the issues in the operations amid the political instability and unethical issues in the nation. The production loss further widened the gap in the supply chain.

The production loss from Escondida coupled with high demand in the industry supported the copper prices and the falling inventory coupled with strong demand led the significant investment banks such as the Citigroup, Goldman Sachs to turn bullish on copper over the long run.

Apart from the demand and supply dynamics, another factor which boosted the copper prices was the improvement in the global economy in the first quarter of the year 2019. The improving signs also marked a rise in manufacturing activity in significant economies such as the United States and China, which in turn, supported the copper prices.

The bilateral disagreement between U.S-China previously exerted the pressure on copper prices in the last quarter of the year 2018; however, the progress in the long-disputing tariff war through trade-talks seems to have provided cushion to the copper prices, and it marked a rise in the first quarter of the year 2019.

In the recent scenario copper prices are moving upwards, however, are currently below the level of $3.293, where the commodity reached on 8th June 2018 amid production loss from Escondida and stable economic conditions in the second quarter of the year 2018.

China PMI improved and moved towards the baseline of 50, which started supporting the copper prices further and in March both Caixin PMI and Manufacturing PMI moved above the level of 50, which prompted the copper prices to extend the gains from the recent low $2.833 (Day’s low on 25th March 2019).

China manufacturing PMI was at 50.5, which was well above its mean value of 50. The rise in manufacturing Index above the base value of 50 denotes an expansion in economic activity, which in turn, supported the copper prices.

Not just the China Federation of Logistics & Purchasing index (China PMI) improved, the Caixin Manufacturing Index also marked rise, and the index surged to mark a level of 50.8 in March, against the market expectation of 50.1. The increase in the value of index above 50, combined with the China PMI, represented rapid expansion in the manufacturing sector in China, which in led the prices to skyrocket in the international market.


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