The medium to longer term is looking good for copper, even if it is currently being held down by trade tensions.
Dow Jones has reported that an increasing undersupply of the mineral is being ‘baked in’ to the current copper price, which is being held back on fears that a protracted trade war between the US and China could see the latter’s appetite for raw materials dwindle.
However, on the supply side there have been several issues preventing more of it making it to market.
For example, unionised workers at Chuquicamata in Chile, which produced 1.5 percent of global copper output last year, went on strike on Friday after contract negotiations with management fell through.
Meanwhile, supply issues are emerging in Africa — with the Zambian government winding up Konkola Copper Mines (the seventh largest producer in the world).
The longer-term also looks thin for supply, with no new mines brought online last year.
It’s why despite current small trading volumes in copper putting the metal in somewhat of a holding pattern, there’s a fundamental story building under copper which could emerge once trade tensions ease.
“Disruption from Chile or Zambia are wake-up calls for investors to realize how fragile the supply chains in this domain and how upside volatility may exist in the most unexpected times,” senior portfolio manager at Neuberger Berman, Hakan Kaya, said.
This content does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.
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