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Copper Plunges 2% on Rising US Dollar, Supplies

November 7, 2017 at 17:38 by Andrew Moran

After hitting a three-month high to start the trading week, copper futures have plummeted more than 2% on Tuesday. With the US dollar posting solid gains and investors worried about growing copper supplies, the industrial metal is deep in the red.

December copper futures tumbled $0.0695, or 2.20%, to $3.088 per pound at 16:26 GMT on Tuesday. Year-to-date, copper prices have advanced more than 21%, buoyed by investors’ bullish behavior and a strong October performance.

The red metal is being mostly affected by a surging US dollar as the greenback climbed 0.20% on Tuesday. A strengthening greenback is bad for dollar-denominated commodities like copper because it makes it more expensive for foreign investors to purchase.

Copper is also taking a hit on reports that some of the biggest producers of the metal are witnessing higher output. The Democratic Republic of Congo, Africa’s top copper producer, reported that output was up 9.3% in 2017 at 831,000 tonnes.

Copper’s performance on Tuesday is a dramatic shift from over the last week.

The industrial metal has been soaring, particularly from positive sentiment during last week’s London Metals Exchange (LME) industry gathering in London. Industry leaders anticipated stronger growth, especially when it comes to demand from the electric vehicles (EVs) sector.

In June, IDTechEx, an electronics consultancy company, projected that copper could experience a 90% increase in demand from the automobile industry over the next decade, stemming from the production and sale electric cars and buses.

Demand for electric vehicles is forecast to increase significantly over the next ten years as technology improves, the price gap with petrol cars is closed and more electric chargers are deployed.

Our research predicts this increase will raise copper demand for electric cars and buses from 185,000 tonnes in 2017 to 1.74 million tonnes in 2027.

Some analysts have warned in recent weeks that the copper market is overstretched, and that the commodity could retreat from new highs and begin to trade sideways.

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