Industrial Insight

Copper | July 24, 2017

Copper MMI: Copper Charges Ahead on Bullish Run — For Now

by Irene Martinez Canorea on JULY 10, 2017
Style: Market Analysis Category: Metal Pricing, Non-Ferrous Metals, Premium

The Copper MMI inched two points higher in July, driven by the recovery of the LME Copper 3-month price, which has been bounced off its previous lows and has increased by 4.98%. The copper MMI is back to April’s levels.

Analysis of supply and demand might suggest quite a bullish outlook for copper. Supply and demand has indeed driven copper prices in June.

During this past month, strikes have eased and production ramped up again. Even the strike at Freeport mine in Indonesia, the world’s second-largest copper mine, is set to continue and production will likely remain the same.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

On July 4, mining company Antofagasta announced it, too, might face a strike. This strike could impact two copper mines: Zaldivar and Centinela. The decision will be made at the end of this week. Chilean mining company Antofagasta Minerals is one of the largest global copper producers, with a combined annual production at both mines of 160,000 tons.

The International Copper Study Group (ICSG) has announced a possible supply deficit for this year. This is based on June’s released data on copper world mine production, which is estimated to have decreased by 3.5%, and world refined production, which is estimated to remain unchanged.

However, LME copper prices have started July with a five consecutive days of drops. Although June suggested a slight uptrend for copper, MetalMiner does not believe the uptrend is sustainable, as I reported in last Monday’s copper article.

Source: MetalMiner analysis of FastMarkets

The LME copper price has not been able to break its psychological ceiling of $6,0000/metric ton. Moreover, recent weakness at the beginning of July, combined with poor trading volumes, suggests further weakness. Unless trading volumes shift, they are not supportive of copper prices.

The U.S. dollar and Chinese PMI indicators have historically shown correlation with copper prices. Even the U.S. dollar has shown a little uptrend during June, but its downtrend may continue, which would negatively impact copper prices. The short uptrend that has boosted copper prices during May and June has been caused by supply concerns.

U.S. Dollar. Source: MetalMiner analysis of StockCharts

The Chinese Manufacturing PMI rose unexpectedly to 50.4 in June. But this small increase may just be a blip. Current sentiment suggests Chinese demand may once again fall, as authorities are still working to curb financial risks.

In addition, the construction sector has fallen during the first quarter of 2017 by 83% (measured by value).

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About author

I'm the executive vice president for a steel casting trade association, the Steel Founders' Society of America. I've got a crazy wife, five crazy children, three crazy people that married into the family, and two crazy fun little grandsons.

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