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Copper Continues to Hover

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Copper Continues to Hover

Despite a small dip in overnight trading, the price of copper continues to hover around a one-month high this morning thanks mostly to labor protests in top producer Chile intensifying, raising concerns about supply shortages.

Thousands of Chileans are protesting in Santiago against high living costs. The civil unrest has prompted Chile’s President Sebastian Pinera to declare the country was “at war” with vandals.

The union of workers at BHP’s Escondida, the world’s largest copper mine, will hold a day-long strike today in a show of solidarity with protests in Chile.

“Copper prices yesterday edged higher after Chile copper miners joined social strikes there. Since the protests that miners joined are a possible social movement, it could last longer than expected,” analyst Helen Lau of Argonaut Securities told Reuters.

Copper on the London Metal Exchange (LME) was down 0.2% in overnight trading as investors sit and wait to see if shipments out of Chile may be disrupted due to the unrest. You can read more about the situation in Chile here.

Copper opened this morning hovering near $2.63 a pound. Click on the chart below to see the current price of the red metal.

ICSG Report Shows Copper Deficit

According to a new report by the International Copper Study Group (ICSG), the copper market was in a 220,000-ton deficit in the first six months of the year compared with a 177,000-ton deficit in the same period in 2018.

Broken down in laymen’s terms, mined copper production worldwide fell by about 1.4% in the first half of 2019, with Chile output declining 2.5% due to lower copper head grades. That makes the recent labor concerns that much more of a concern as investors look to the stretch run for the remainder of the calendar year.

Don’t Forget About Trade Talks

While labor talks are the focus for copper this morning, trade talks between the U.S. and China remain a pillar for the red metal’s future.

On Monday, President Donald Trump said efforts to end the trade war with China were going well. China’s Vice Foreign Minister Le Yucheng echoed those sentiments today when he told reporters the two countries had achieved some progress in their trade talks.

A mix of tight global supply and weak demand due to the ongoing trade dispute means prices are likely to keep bouncing along near current levels.

“When it comes to the future evolution of the trade war, the copper market is likely to remain a significant barometer,” states Andrew Hecht of Seeking Alpha. Hecht continued with the same message he, and other analysts have maintained since the first tariff was launched, “A trade deal between the U.S. and China would likely send the price of copper higher. A continuation of the status quo and further escalation would weigh on the prices of copper and base metals.”

Update on Brexit and Copper

As promised last week, here is an update on the impact, if any, Brexit talks would have on copper. Prices advanced, even though slightly, on Friday after news of a tentative divorce deal between the United Kingdom and the European Union.

The deal is not finalized as of this morning. We will continue to monitor the situation, as well as the trade talks and labor strife in Chile.

 

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Jim Williams

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