The market’s focus has switched from solely geopolitical to very real supply issues, and that’s great news for copper.
While the price of copper has been held down by concerns over the way the current geopolitical picture is going to play out, there are signs that traders are starting to focus on the fundamentals.
Copper has staged somewhat of a mini-recovery in recent weeks, with it going up on both supply issues and softer commentary around the US-China trade dispute.
From the London Metals Exchange 3-month ABR. Past performance does not indicate future gains
On the former, the market has continued to digest news of a work stoppage at a significant mine in Chile — which could leave the market 10,000 tonnes short, which has only highlighted other supply-side issues.
These include rains in northern Chile and stoppages at several smelters in Zambia amid a conflict between the government and mining companies operating there.
However, the macro has also had a role to play in its recent recovery — with US Treasury Secretary Steven Mnuchin telling CNBC that “we were about 90 percent of the way there and I think there’s a path to complete this” — regarding the possibility in a detente in the trade war being waged between the US and China.
It was a view backed by Citibank, according to Reuters reportage.
“With this week’s G20 and Citi’s view of at least a truce/handshake, along with expectations of new stimuli from China’s Politburo meeting next month, we are bullish on copper,” Citi analysts said in a note, according to Reuters.
Given copper is seen as a proxy to building activity given its prominent role in building wiring, a trade war could negatively impact China’s construction efforts — leading to less demand for copper.
This content does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.
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