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Copper Futures Dip 1% as Bull Sentiment Fades

April 19, 2017 at 17:12 by Andrew Moran

Copper futures fell as much as 1% during the Wednesday trading session. With fund managers decreasing their positions in copper, the bullish sentiment appears to be fading as supplies of the red metal normalize. Investors also fear that US demand may be minimal this year.

May copper futures tumbled $0.015, or 0.59%, to $2.514 per pound at 16:42 GMT on Wednesday on London’s ICE Futures exchange. The industrial metal had rebounded from a 14-week low at the start of the trading session, but has since pared those gains. Year-to-date, copper prices are trading flat as they are down just 0.04%.

After experiencing a so-called supply disruption premium at the beginning of the year, the red metal’s momentum is ostensibly diminishing. This is because global supplies are returning to normal.

The Ministry of Energy and Mines in Peru announced that the nation’s copper output climbed by 5.42% in February. Overall growth for the first two months of the year has reached nearly 15%.

Operations have restarted at the world’s two largest mines: the Escondida mine in Chile and the Grasberg mine in Indonesia. Although some industry experts believe there could be potential conflict between labor and business at these two mines, analysts contend that copper supplies stemming from these locations will remain stable for the foreseeable future.

Copper prices are being supported by reports that China’s industrial sector is recovering. Also, the International Monetary Fund (IMF) increased its forecasts for the nation’s economic growth in 2017 and 2018, which would be a boon for copper as it would raise demand.

It is still unclear if US President Donald Trump is moving ahead with his $1 trillion infrastructure initiative. The red metal had skyrocketed soon after the election because of the president’s plan, a move that would significantly boost demand for copper. This year, the president has just made brief allusions to the idea, but nothing has yet to materialize.

Geopolitical tensions in the Middle East and East Asia are contributing to the market selloff of copper.

All of this is prompting fund managers to transition out of copper. According to Reuters, fund managers are reducing their net long positions in the industrial metal. This comes at a time when a greater amount of money is flowing into the commodities sector.

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