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Copper Rises on Supply Concerns in World’s Top Producer Amid COVID-19

June 29, 2020 at 16:49 by Andrew Moran

Copper futures are rising to start the trading week, driven by concerns over supply disruptions in the world’s top industrial metal producer. Copper prices had also been finding support in a slightly weakening US dollar as currencies continue to be a major factor in the red metal’s trading patterns. After a huge comeback since March, is copper poised for more gains in the months ahead?

September copper futures advanced $0.0335, or 1.26%, to $2.6925 per pound at 16:26 GMT on Monday on the New York Mercantile Exchange. The red metal enjoyed a 1% gain last week, paring its year-to-date loss to below 4%. The big story for copper prices has been the 25% spike since crashing in March.

Investors are paying attention to the situation in Chile where there has been an outbreak among workers in copper mines. Nearly 2,000 Codelco employees have been infected with the coronavirus, according to figures compiled by the Federation of Copper Workers union. So far, four people have died. The state-owned company has a workforce of more than 71,000.

While Codelco has yet to issue a public statement, it has stepped up measures to contain the spread. This week, it implemented a 14-days-on and 14-days-off shift at some of its largest mines. It has also suspended smelting and reduced refining at other facilities. But union officials do not think these efforts go far enough, with some leaders recommending shutdowns at several mines.

Codelco is stuck between a rock and a hard place. The company is trying to keep workers safe while also maintaining output levels to finance the government’s exorbitant spending amid a declining economy.

The Chilean government is warning that its copper production levels could crash approximately 200,000 tons, or about 3.5% of its 2019 output.

Analysts will also keep an eye on Peru, where the number of COVID-19 cases keeps rising. This could also affect the nation’s copper output.

In other industry news, China’s copper scrap imports plummeted at an annualized rate of 60.2% to 69,469 tons in May.

Although the US dollar has been climbing in recent sessions due to volatility in global financial markets, the greenback has erased most of its gains this year. A weaker buck is benefiting copper and other commodities priced in dollars since it makes them cheaper for foreign investors to purchase. On Monday, the US Dollar Index, which measures the greenback against a basket of currencies, edged up 0.07% to 97.50.

In other metal markets, August gold futures added $1.50, or 0.08%, to $1,781.80 per ounce. September silver futures fell $0.093, or 0.51%, to $18.075 an ounce. August platinum futures picked up $11.10, or 1.35%, to $830.40 per ounce. August palladium futures surged $22.30, or 1.18%, to $1,916.70 per ounce.

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