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Copper Holds Steady Despite US Recession Fears, Disappearing Deficit

March 26, 2019 at 19:53 by Andrew Moran

Copper futures are holding steady on Tuesday, looking to record its second consecutive session gain. Investors are remaining cautious that a US recession could impact demand levels, even if the federal government initiates its long-proposed $1 trillion infrastructure spending plan. It had also been anticipated for a while that there would be a global supply deficit, but a new estimate suggests this deficit will be wiped out.

May copper futures rose $0.0065, or 0.23%, to $2.863 per pound at 19:21 GMT on Tuesday on the Comex division of the New York Mercantile Exchange. The industrial metal has had an excellent first quarter of 2019, advancing more than 8% year-to-date.

There is a lot of talk of a recession hitting the US. Although officials say that the economic boom could be extended by a decade, The Street continues to increase its expectations that a contraction is imminent. Even the central bank is boosting the odds of a recession within the next year as the Federal Reserve Bank of New York (FRBNY) pegged the chance of a recession by February 2020 to 24.6%, citing the Treasury spread 12 months ahead.

If the economy cools down, then the demand for copper, which is primarily used for construction and manufacturing, could diminish. But could the federal government’s infrastructure spending initiative help the red metal? Investors are just waiting for an official announcement from the White House pertaining to its policy proposal of spending $1 trillion over a 10-year period on infrastructure.

Meanwhile, traders are also waiting for results from the year-long US-China trade negotiations. Every time it looks like a new trade agreement will be struck, there is a hurdle to overcome. A US delegation is in Beijing this week to meet with their Chinese counterparts.

Last week, it was reported that the industry is forecasting a global copper market deficit of 300,000 tonnes by the end of the year. However, Fitch Ratings noted that a series of new projects and pipelines could eliminate any market deficit in the medium term.

In industry news, cash copper retreated from a $70-per-tonne premium earlier this month to a $3-a-tonne discount.

In other metals markets, June gold futures slipped $6.40, or 0.48%, to $1,322.60 per ounce. May silver futures shed $0.13, or 0.87%, to $15.43 per ounce. May platinum futures tacked on $1.90, or 0.22%, to $859.60 an ounce. May palladium futures plunged $29.00, or 1.88%, to $1,514.40 per ounce.

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