Is Copper Moving Up?
TradingBanks | Aug 18, 2016 11:55AM ET
Earlier today, copper futures bounced back from the recent decline as the dollar slipped after the renewed rate-hike view . The red metal traded at 218.20 and slumped at 216.35 at the close of the market on Wednesday. However, the metal found a recovery despite the struggling demand for the commodities.
On the London Metal Exchange, the three-month copper advanced 0.3 percent to trade at $4,786.50 per ton, stepping away from the weakest price of $4,750.50 per ton for the month of August.
Considered as one of the primary producers of the red metal, China’s output in July climbed by 9.6 percent, despite the slowdown of the domestic mining output. Meanwhile, the biggest overseas mining effort by the Chinese, called Las Bambas project in Peru, has begun its commercial operations.
The world-class copper mine will focus more on copper production as it starts the copper operation in Peru. In 2017, the owner of the company expects it to be the world’s sixth largest copper mine on an annual basis.
As seen in the graph below, BMI Research claimed that Beijing was forced to cut production of its metals and minerals. Specifically, the consumption of copper has exceeded the supply in China as the copper concentrates shipments increased more than a third.
A well-known financial services corporation indicated on its recent report that “Copper's mine supply through the first half of 2016 has marginally outperformed our expectations, with disruptions tracking at 1.8 percent year-to-date. If this low rate of disruption continues through the second half, mine supply will exceed our initial forecast by around 230,000 tonnes in 2016 - bearish for copper's price.”
Last week it was reported that copper futures eased on the Multi Commodity Exchange and dropped marginally at ₹317 per kg.
The red metal has been trading lower these past few days, but it found a recovery at the session earlier. As seen in the image below, the metal touched 4.805.33 on Wednesday night and broke the support at 4818.50. For the long term outlook, it will likely remain low as the Parabolic Sar shows a palpable downward trend. If the red metal couldn’t break even the 4845 level for today, then the selling pressure will remain.
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Separately, the greenback traded lower as the investors expected the Fed to finally implement a rate hike very soon. As the U.S. dollar moves lower, the commodity prices move upward. Investors tend to seek for safer assets in times of market uncertainties. However, the gains might not be sustainable due to several factors.
Conclusion
As seen on the image above, the trend of the red metal was generally vague. Investors need to wait clearer movement of the copper and the finalization of the relative market events such as the Fed rate hike. The supply and demand of the red metal must be observed as well.
Similar to the case of other commodities, the glut supply will surely hurt the copper price. There has been no clear indication of a massive breakdown or a rally, and yet the increase of the mining effort could signal for a ramp up of output soon. In case the volatility in the U.S. currency remains, then the red metal will probably stay at the uptrend.
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