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Copper Rises 1% on Supply Disruptions, Deficit Forecasts

June 18, 2019 at 13:08 by Andrew Moran

Copper futures are rallying on Tuesday, buoyed by supply disruptions in South America that support forecasts that the industry will face a deficit within the next two years. The jump in copper prices also comes as the Federal Reserve commences its two-day monetary policy meeting that will inevitably affect the greenback, which is important for dollar-denominated commodities.

July copper futures surged $0.03, or 1.15%, to $2.68 per pound at 12:39 GMT on Tuesday on the Comex division of the New York Mercantile Exchange. After sliding for much of the year, the industrial metal has pared all its losses and is now in positive territory by more than 1% year-to-date.

In Chile, the Codelco-owned Chuquicamata mine entered into its fourth consecutive day of work stoppage after executives and labor failed to strike a deal. This is one of the world’s largest mines because it produces more than 320,000 tonnes of copper per year. It remains unclear as to when operations will restart.

Global output levels were further affected by a Zambian smelter temporary shutting down for immense refurbishment. This is bad news for Africa’s second-largest copper producer because the country already confirmed that it would experience a decline in production levels because of the mining tax that was imposed late last year.

China also recorded a decrease in output, tumbling 3.9% in May to 711,000 tonnes.

One of the latest forecasts for the state of the copper market comes from the Bank of Montreal (BMO). The financial institution estimates that the industry will face a deficit of 260,000 tonnes in 2019 in the overall 24-million tonne market.

Copper prices rallied on data showing a decline in copper inventories monitored or registered by the London Metal Exchange (LME) or the Shanghai Futures Exchange (ShFE), falling to 250,750 tonnes and 139,556 tonnes, respectively.

This week, the Federal Open Market Committee (FOMC) will hold a policy meeting. It is expected to discuss interest rates, economic growth, and the US-China trade war. Although it is not anticipated to cut interest rates in June, many think a July rate cut is a sure bet. But global markets are paying close attention to the meeting, and this placed a cap on copper’s ascent because a dovish central bank signals that the economy is slumping and needs stimulus.

In other metal markets, August gold futures soared $13.50, or 1.01%, to $1,356.40 per ounce. July silver futures advanced $0.14, or 0.95%, to $14.97 an ounce. July platinum futures tacked on $6.90, or 0.87%, to $801.50 per ounce. July palladium futures skyrocketed $23.00, or 1.58%, to $1,478.50 per ounce.

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