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Copper 2017 – Is It Déjà Vu All Over Again?

Copper 2017 – Is It Déjà Vu All Over Again?

By Jim Williams

Hall of Fame baseball player Yogi Berra was talking about baseball when he said, “It’s déjà vu all over again,” but he could have easily been talking about the price of copper. Berra had a few Yogisms that apply to the red metal, but that one hits close to home for anyone with a vested interest in the price of copper.

“The future ain’t what it used to be”
Another gem from Berra that could be the mantra for copper. We are almost a month into 2017. Enough time to get a take on how the year is shaping up and how it compares to 2016. We have a new president in office who looks like he is going to try and fulfill all of his campaign promises in his first week, copper is hitting higher highs than it has maintained in years, and China is coming off of a year that by the numbers appears to be extremely strong.

Obviously, we are being a little facetious on President Donald Trump, but he has been extremely active in his first week in the White House. That bodes well for the copper industry based off his promise to build infrastructure.

Copper prices shot up after the election in November. They have continued to surprise so far in 2017. But as we all know, and Yogi said best, “The future ain’t what it used to be.”

“Prices could be due for a correction in the first half of the year if those infrastructure plans fail to materialize”, Caroline Bain, commodities economist at Capital Economics, told Market Watch. “The rallies seem to be fueled by optimism about demand, rather than demand,” adds Bain.

Demand. Copper. It is déjà vu all over again! Some things never change. When you talk demand you need to look beyond the U.S. and see what is happening in China. Seeking Alpha recently pointed out that China’s economy in 2016 was boosted by higher government spending and record bank lending. China’s economy grew 6.7 percent in 2016. That sounds great on the surface, but it is the middle of the predicted 6.5 percent – 7 percent target, and more importantly – the slowest pace since 1990.

So, tED reached out to its frequent contributor, and Seeking Alpha’s own, Andrew Hecht, to get his opinion on where he sees 2017 as 2016 fades out of the rearview mirror.

“Infrastructure spending in the U.S. opens a new demand vertical for the red metal that has not been there in past years,” Hecht told us. “Copper is around $2.65 per pound on COMEX. LME stocks have been on the decline, dropping from 350,000 MTs a few months ago to 275,400 as of last Friday. The decline in stocks is a positive and supportive factor for copper.

“Any unexpected growth in China will just add to the supportive case for copper’s price. I expect it to try to make a new high above $2.75 and remain above the $2.30 level in 2017,” concludes Hecht.

Hecht recently wrote on this topic. You can read his Seeking Alpha article on the possibilities of 2017 being a repeat of 2016 here.

“It ain’t over ’til it’s over”
It looks like it could be a slow week in China leading up to the Chinese New Year, but the markets will be active here in the States as President Trump’s administration continues to put its stamp on the global economy.

We will continue to report on the price of copper every week, because like Yogi said, “It ain’t over ’til it’s over.”

Additional Reading
Metal Miner – Copper Had A Strong 2016, Where Will It Go From There?

 

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