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Copper Unable to Keep Momentum After Report Shows Electric Vehicles Will Boost Demand

June 13, 2017 at 16:56 by Andrew Moran

Copper futures have slipped away from a two-month high as the Federal Reserve kicks off its two-day policy meeting. The industrial metal has been trading at its highest level since April because of a new report highlighting rising copper demand in the future because of electric vehicles.

July copper futures tumbled $0.023, or 0.90%, to $2.59 per pound at 16:38 GMT on Tuesday. Year-to-date, copper prices have been trading relatively flat as the red metal has advanced just 2.8%. It remains higher than it was a year ago when it was trading at just over $2.

The industrial metal slipped ahead of the Federal Open Market Committee (FOMC) meeting, where it is expected the US central bank will pull the trigger on a second rate hike this year. If the Fed moves ahead with a rate hike, interest rates will stand between 1% and 1.25%, which is still historically low.

Rising rates are expected to give the US dollar a boost. A stronger greenback is bad for dollar-denominated commodities like copper because it makes it more expensive for foreign investors to buy.

Copper futures were also impacted by reports that analysts expect a surplus rather than a deficit this year. Despite strikes at the two biggest copper mines earlier this year, observers forecast an 80,000-tonne surplus this year instead of a 17,000-tonne deficit.

Investors have been combing over a new industry report that projected that copper could experience a nine-fold increase in demand from the automobile sector over the next decade. According to IDTechEx, an electronics consultancy organization, electric or hybrid cars and buses are forecast to top 27 million by 2027.

Demand for electric vehicles is forecast to increase significantly over the next ten years as technology improves, the price gap with petrol cars is closed and more electric chargers are deployed.

Our research predicts this increase will raise copper demand for electric cars and buses from 185,000 tonnes in 2017 to 1.74 million tonnes in 2027.

With infrastructure spending supposed to be a major priority for governments all over the world, copper could be on the brink of a major breakout.

Other precious metals are bleeding red ink. August gold futures have dipped $2.90, or 0.23%, to $1,266.00 per ounce. July silver futures have lowered $0.15, or 0.94%, to $16.78 an ounce.

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