The long weekend couldn’t stop a recent trend of seeing copper prices rise. The London Metal Exchange (LME) prices opened higher as markets reopened after a holiday weekend, underpinned by buying from top consumer China and expectations of monetary easing in Europe.
Three-month copper opened for trading on the LME this week at $6,952 per tonne. That’s the highest level since early March. The early boost was a result of overnight comments from European Central Bank (ECB) chief Mario Draghi, who continues to hint at coming measures, saying the ECB must be “particularly watchful” for any negative price spiral in the euro zone, and that “more pre-emptive action may be warranted.”
Earlier this month Reuters reported that the ECB is preparing a package of policy options for its June 5 meeting. It includes cuts in all its interest rates as well as targeted measures aimed at boosting lending to smaller firms. We will keep an eye on the calendar and update you with any changes in the price of copper as a result of next month’s meeting.
MetalBulletin.com quoted a Category I trader on the topic of the three-month high in copper, “What we are seeing is follow-through buying from last week. There is some short covering in East Asia. Shanghai was up a little bit, but it is all just technical and short covering.”
“Copper is meeting some resistance at 7000 in London,” says Michael Turek, Senior Director and Head of Metals Desk at Newedge. “But it is still well supported by tight backwardations, which are symptomatic of lack of available supply.”
That lack of supply has other experts thinking the red metal may rally yet this year. Tom Meyer, analyst at CIBC World Markets, was recently quoted as saying copper’s tightness could create rapid price spikes this year, “Like natural gas advancing from its April 2012 lows, and the surprisingly sharp and unexpected move higher in nickel and molybdenum this year, we wonder what could be in store for copper,” he said. “The risk of production disappointments is high, in our view, and thus with a limited buffer, the price moves can be swift.”
Investors are also keeping an eye on Ukraine, which launched air strikes and a paratrooper assault against pro-Russian rebels who seized an airport on Monday. The escalation in the ongoing crisis was tempered by the decisive win for billionaire Petro Poroshenko in Ukraine’s weekend presidential election, which many hope will help bring some stability to the situation.tED