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Copper Rises on Undersupplied Market, Chinese Stimulus

January 8, 2019 at 19:38 by Andrew Moran

Copper futures are posting modest gains on Tuesday after a new report showed that the global industrial metal market is undersupplied while demand is steadily rising. The red metal has also risen on China, the world’s biggest consumer of copper, launching a stimulus initiative to revive its fledgling economy. Copper is looking to bounce back from a poor 2018.

March copper futures advanced $0.015, or 0.57%, to $2.65 per pound at 18:05 GMT on Tuesday on the Comex division of the New York Mercantile Exchange. Copper prices have rebounded nicely since tumbling to $2.56 a week ago.

A new copper supply and demand outlook by Fitch Solutions shows that global refined copper consumption will record admirable growth in the coming years, buoyed by the energy sector, positive global economic growth, and the electric vehicle industry. It is forecast that international copper demand will surge to 29.8 metric tons by 2027, up from 23.6 metric tons last year, representing a 2.6% annual growth.

This could be good news for copper traders because the global copper market remains undersupplied, outpacing supply growth. Right now, production is unable to keep up with the demand, creating a widening deficit over the next three years. However, should new copper projects come online, then researchers note that the deficit could shrink and shift into an oversupply.

The report lists Chile, Peru, and Australia as the leading global producers.

This comes as a separate government report projected that Chile’s copper production will exceed six million tonnes for the first time this year and continue to increase 30% over the next decade. Cochilco, the country’s state-run copper agency, cited new mining investments and expansions as the primary drivers of this immense output level.

Copper prices are further benefiting from the world’s second-largest economy initiating new measures to support the country. In addition to announcing new trade talks with the US and slashing bank reserve requirement ratios, China has put forward policy measures like tax cuts, increased lending, and new infrastructure projects.

In other metal commodities, February gold futures shed $3.70, or 0.28%, to $1,286.20 per ounce. March silver futures dipped $0.04, or 0.26%, to $15.71 an ounce. March platinum futures were flat at $823.50 per ounce. March palladium futures surged $25.30, or 2.04%, to $1,265.50 an ounce.

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