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Copper Futures Climb on Strike Worries, Chinese Economic Data

March 15, 2017 at 16:57 by Andrew Moran

Copper futures are surging on Wednesday on potential supply disruptions due to renewed striking efforts at the world’s two biggest mines of the industrial metal. Copper prices are also climbing on a weaker US dollar, positive Chinese economic data, and bullish sentiments from Goldman Sachs.

May copper futures rose $0.0205, or 0.78%, to $2.655 per pound at 16:30 GMT on Wednesday on the New York Mercantile Exchange. The metal has risen for four consecutive sessions. Copper has been looking to rebound ever since hitting an eight-week low last week. Copper is maintaining its modest first quarter gains as it is up nearly 6% year-to-date.

It is possible that the red metal could pare its Wednesday gains after the Federal Reserve makes its announcement pertaining to interest rates. The market widely expects the US central bank to confirm that it is raising rates for the third time in a decade.

The red metal is surging midweek due to a wide array of factors. One of them is the fact that global supplies may be disrupted because of possible work stoppages at Escondida in Chile and Grasberg in Indonesia. The strike in Peru is continuing, though it may be stopped by the end of next week as per government orders.

Upbeat economic data from China are also contributing to copper’s rise. The Statistics Bureau of China confirmed on Tuesday that industrial production spiked by 6.3% in January and February. Fixed asset investment increased by 8.9% because of immense private sector investment. These are important data points because China consumes nearly half of the world’s copper supply.

Despite a commodities rout in 2017, Goldman Sachs said in a note to investors on Monday that it is bullish on oil and copper. Citing strengthening market fundamentals, the investment titan’s analyst Jeffrey Currie recommended investors to stay long on US crude and copper.

All of these concerns are misplaced and argue that the market needs a little patience to wait for the fundamentals to materialize.

What gives us confidence in tighter forward commodity markets despite this past week’s sell was that it was mostly time-spread neutral across the commodity complex. In fact, front end WTI time-spreads strengthened into Thursday and Friday’s flat price weakness. If the sell-off was driven by fundamental weakness, time spreads would have weakened.

The US dollar has weakened in the last three trading sessions, a boon for copper. A strong greenback is bad news for commodities like gold, silver, and copper because it makes it more expensive for foreign investors to purchase.

If you have any questions and comments on the commodities today, use the form below to reply.