By Jim Williams
At the end of the day all eyes will remain on China, but this week the focus on the price of copper has shifted to Switzerland, Germany and right here in the United States.
The most recent news came from Freeport-McMoRan Inc., the biggest listed U.S. copper producer. The company, under pressure from shareholder Carl Icahn, announced Tuesday it is cutting its board from sixteen to nine with plans to spin off its oil and gas business and return to its roots as a copper-focused mining company. Roughly 60 percent of Freeport’s $21 billion of revenue in 2014 came from copper, with about 20 percent from oil.
“As a copper company, it is a world-leading copper company,” Adrian Day, chief executive of Maryland-based Adrian Day Asset Management told Reuters. “It is definitely not a world-leading oil and gas company. They should focus on what they are doing best,” Day said.
Last week Icahn told Reuters he was very bullish on the prospects of the copper business, saying, “Copper prices in the next few years will rise again. There is a very delicate balance between supply and demand. And right now, there is a little too much supply.”
Meanwhile, copper prices teetered back and forth between slight gains and losses on Tuesday thanks to weak manufacturing data from Germany against support from a weaker dollar.
“The weaker dollar means there’s a little bit of life in the copper market, finally,” said Bob Haberkorn, a senior commodities broker with RJO Futures in Chicago. But…”The global economic picture is going to keep this market under wraps for the time being,” Haberkorn added.
It appears to be another day, another dollar for copper investors as they have apparently shaken off the recent positive momentum around Glencore PLC, the giant commodities group whose troubles have been moving the copper market. The Switzerland-based company traded down Tuesday, after a strong showing on Monday after management assured investors the commodities group remains financially robust. Glencore’s shares have tanked recently because of concerns that the world’s largest copper supplier and thermal coal exporter may struggle to safeguard its credit rating.
Frequent contributor Andrew Hecht, from Seeking Alpha recently posted an article looking back at the third quarter while looking ahead to the fourth. “The fact that the U.S. dollar is a lot higher than it was last year, together with lower Chinese and European growth, makes it hard to be positive on this sector,” Hecht writes.
“Copper continues to look weak, as action during Q3 is just a continuation of lower highs and lower lows – something we have witnessed since the red metal peaked in 2011,” adds Hecht. “I expect that base metal prices will reflect the health of the global economy in Q4, and that those markets in deficit and those that have dropped the most will perform the best in terms of price. The bottom line is that the developments surrounding the Chinese economy will continue to dictate prices for the rest of 2015.”
Click here to get Andrew’s entire take on copper. You can also follow him on Twitter @technomentals.Tagged with tED