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Copper Slips Below $3.20 on Profit-Taking, Mining Operations

November 17, 2020 at 16:54 by Andrew Moran

Copper futures slipped below the important psychological level of $3.20 on Tuesday as investors took profits and braced for fresh supplies amid a wave of new mining operations coming online. With the industrial metal set to benefit from an increase in fiscal and monetary stimulus and relief over the coming months, any decline in red metal prices could act as a buying opportunity. But will the global copper market face a surplus or a deficit over the next few years?

January copper futures tumbled $0.0275, or 0.85%, to $3.1945 per pound at 15:33 GMT on Tuesday on the New York Mercantile Exchange. Copper prices have been trending mostly upward, particularly from optimism over the coronavirus vaccines from Pfizer and Moderna. Year-to-date, the industrial metal has advanced more than 14%.

Copper prices had been surging to fresh multi-year highs on Monday due to concerns over supply interruptions in Peru and strengthening global demand. The metals market was also euphoric surrounding the news of the launch of a Chinese futures contract for international investors.

Peru is currently the world’s second-largest copper producer, behind Chile. In recent days, there has been intense political chaos, with immense demonstrations filling the streets of Lima, triggering consternation over the possibility of disruptions to mining operations.

Meanwhile, foreign investors can now trade copper futures on the Shanghai International Energy Exchange (SIEE). It will be priced in yuan, allowing the exchange to compete with the London Metal Exchange (LME). The contract will exclude taxes and duties.

China has been importing huge levels of copper. In October, for example, the country imported 618,000 tons of unwrought copper, which increased the year-to-date total to an annual high of 5.6 million tons. Beijing consumes about half the world’s copper.

Over the last week, many different mining operations have either been announced or have come online. Codelco stated that it would extend its copper mining efforts at the Chuquicamata pit into 2021, which has produced more than 30,000 metric tons. Glencore is set to open a copper mine in Zambia’s Mopani. The White House approved the Rosemont copper mine, much to the dismay of environmentalists.

In industry news, the global refined copper market will be in a deficit by 5,000 tons this year and then climb to more than 200,000 tons in 2024, according to S&P Global.

The greenback continued its downward trend on Tuesday. The US Dollar Index, which gauges the greenback against a basket of currencies, fell 0.24% to 92.42, from an opening of 92.64. A lower buck is good for dollar-denominated commodities because it makes it cheaper for foreign investors to purchase.

In other metal markets, December gold futures dipped $1.50, or 0.0795%, to $1,886.30 per ounce. January silver futures shed $0.162, or 0.65%, to $24.64 an ounce. December platinum futures tacked on $11.60, or 1.25%, to $939.10 per ounce. January palladium futures declined $27.90, or 1.19%, to $2,317.20 an ounce.

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