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Copper Pares Losses After Report Forecasts Market Tightening Late 2018

March 13, 2018 at 16:44 by Andrew Moran

Copper futures pared their losses in the afternoon Tuesday trade following a new report that forecasts market tightening in the second half of 2018. But 2019 is expected to be a big year for the industrial metal because of a lack of new investment and an industry-wide grade decline.

May copper futures rose $0.0105, or 0.34%, to $3.1345 per pound at 16:26 GMT on Tuesday on the Comex division of the New York Mercantile Exchange. The red metal slumped to as low as $3.10 on diminished inflation concerns among investors before rebounding.

Year-to-date, copper prices have tumbled more than 5%. Because supply disruptions and mining strikes in southeast Asia and Latin America have not been as intense or severe as initially anticipated, copper cannot repeat last year’s early-year gains.

The red metal was able to pare its losses after global copper mining juggernaut Antofagasta released its fourth-quarter numbers, full-year results, and market outlook. The copper behemoth projects the market to tighten in the second half of the year, and it will it endure either a balance or a minor deficit for the full year.

Industry observers looked ahead to 2019, and they expect the copper market to be in a deficit, stemming from mine supplies that will likely be impacted by the long-term trend of grade decline and a paucity of new investment. Moreover, there are only a few mining projects that have been approved or in the final stages of the permit process, which means it could take several years before new mining operations take effect.

Antofagasta thinks supply disruptions could be prevalent in Chile throughout 2018 and 2019:

There are an unusually large number of labor negotiations taking place in Chile and Peru during 2018. With the backdrop of stronger copper prices, employee expectations may be raised which could result in some supply disruptions in the region.

According to the US Commodity Futures Trading Commission (CFTC)’s Commitment of Traders weekly data, money mangers and hedge funds have slashed their net long positions in copper to below 28,000 lots in the week ending March 6. This is equal to 720 million pounds, or $2.2 billion.

Copper further benefited from a weaker US dollar as the greenback plunged 0.29%. A lower buck is good for dollar-denominated commodities like copper because it makes it cheaper for foreign investors to purchase.

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