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Copper Struggling for Direction Despite Bullish 2020 Forecast

January 14, 2020 at 16:04 by Andrew Moran

Copper futures are struggling for a firm direction on Tuesday, despite bullish projections of higher prices amid tapped out stockpiles and falling capital expenditures. The industrial metal has been putting together admirable gains over the last 12 months, advancing about 9%. With US-China trade tensions diminishing, could renewed global economic growth lift the red metal above the key $3 mark by next year?

March copper futures edged up $0.0025, or 0.09%, to $2.8635 a pound at 14:48 GMT on Tuesday on the Comex division of the New York Mercantile Exchange. Copper prices have been trading at their best level since April 2019, but Wall Street believes their best days are yet to come.

Since July 2019, inventories at warehouses monitored by three benchmark international exchanges have declined by roughly 37% to around 300,000 tons. This is equal to about 1.2% of global consumption. At the same time, mine production slipped 0.4% year-on-year in 2019 as capital expenditures fall and new operations not coming online fast enough.

It has been predicted for the last six months that there would be a global supply deficit, but the tight supply conditions had been masked by global trade tensions and uncertainty. With some certainty in international commerce, there will be more of a focus on basic supply and demand in copper markets.

Now that the 18-month trade war between the world’s two largest economies is gradually coming to an end, the leading financial institutions anticipate rising demand in China. The two main factors in Beijing will be investments in the power grid and by automakers. According to the General Administration of Customs, China imported 31.8% more copper last month, signaling that there is a ballooning demand again by the top global metal consumer.

Overall, analysts on The Street are forecasting an increase in prices by as much as 3.5% to 4%.

In other metal commodities, February gold futures shed $8.30, or 0.535%, to $1,542.30 per ounce. March silver futures slipped $0.205, or 1.14%, to $17.79 an ounce. March platinum futures picked up $0.80, or 0.08%, to $982.90 per ounce. March palladium futures soared $16.30, or 0.78%, to $2,095.40 an ounce.

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