Bulls Push Price to New Multi-Year High

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Copper Prices, Economic Recovery, Chinese Imports – Talking Points

  • Copper bulls drive price to new multi-year high
  • Lackluster US Dollar helping to support prices
  • Market imbalances continue as China drives demand

Copper futures rose to a fresh multi-year high on Friday. The current COMEX futures price shows $3.1070 per pound, with the rally from its March lows just north of 57%. The performance in the red metal ranks among the best in the commodity space following the COVID-induced market volatility seen earlier this year.

Copper Futures vs US Dollar (Daily Price Chart)

Copper vs US Dollar Price Chart

Chart Created with TradingView

Due to its broad use throughout various industries, the price of copper correlates well with economic output. Thus, the rise in copper prices may serve as a bellwether for continued economic growth. On the other hand economic forecasts show the robust global recovery may slow. The OECD Interim Economic Outlook Assessment released this week states:

“After the initial bounce-back in many activities following the easing of confinement measures, there are some signs from high-frequency indicators and business surveys that the pace of the global recovery has lost momentum since June, particularly in many advanced economies.”

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Nevertheless, other underlying market fundamentals revealed that market imbalances may be supporting copper prices. On the supply side, LME warehouse storage levels dropped to 73,425 tonnes earlier this month, the lowest in 13 years. Storage levels rebounded marginally this past week but remain near the 13-year low. Covid-induced restrictions affecting mining operations are likely to continue having an impact on the supply-side for copper, and will likely persists to a certain degree until countries can better control the ongoing pandemic.

Copper vs LME Copper Warehouse Storage

LME Copper storage vs copper futures

Furthermore, demand for copper is still elevated from some of the largest consumers of the commodity, like China. Robust industrial production data out of China hints at strong underlying demand even though copper imports have dropped off from the previous month. Also, analyzing copper price trends with Chinese imports reveals that China prefers to purchase copper when prices are weak. If this were to continue, there could be potential for the commodity to stay relatively afloat. Not to mention, with the supply side already strained, copper prices may show increased sensitivity to buy-side pressures.

Copper vs Chinese Copper Imports

Copper vs chinese copper imports

–Written by Thomas Westwater, Contributor for DailyFX.com

Contact and follow Thomas on Twitter @FxWestwater





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