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Copper Rebounds Slightly – Q1 Gains Still All But Erased

Copper Rebounds Slightly – Q1 Gains Still All But Erased

By Jim Williams

Those gains in copper prices we saw in the first quarter? Well…

They have almost completely disappeared. Last week saw the biggest loss in copper prices in almost a month (-4 percent) causing analysts to question whether the first quarter rally may be over. This chart illustrates the roller coaster free fall the red metal has been on for the last year. You can see the momentum starting to pick back up in mid-February and throughout March only to take another turn as the calendar flipped to April.

Source: MetalMiner analysis of Fastmarkets.com data (Entire article here)

If you look closely at the tail of the chart above, you can see a slight uptick in the price of copper. That is the start to this week. Experts say the higher prices on Monday and Tuesday can be attributed to a jump in crude oil and new data out of China.

U.S. oil was up 3.9 percent to almost $42 a barrel. Copper and oil seem to have the opposite effect of oil and water – they tend to mix well when it comes to trading. That’s because many investors trade the two commodities at the same time. Therefore, if oil goes up, copper generally follows suit.

Copper also received an early-week reprieve thanks to China’s copper producer prices falling less than expected in March. Another key factor is the expectation of a good report from next month’s GDP report. A more stable consumer inflation and improved cars sales in China also helped. However, analysts point to an upcoming lull in seasonal demand that may keep prices in check.

“I think it’s very questionable whether this will be anything significant to the upside,” said Bill O’Neill, a broker at LOGIC Advisors.

Hennie Faul, CEO of mining giant Anglo American’s copper division agrees. He had this to say at the annual CESCO week in Chile last week: “The company [Anglo American] is planning for several more years of tough times. I wouldn’t say there are any signals out there to show us there are green shoots – certainly nothing fundamental. Various assessments by analysts are generally bearish for the copper market outlook, but we would rather plan for a bearish environment and keep the margins available for an upturn.

“But again, I don’t see any significant signs for an upturn yet,” Faul added. “We are planning and focused on a further downturn of three to five years – that’s what we plan for, and we hope for the best. But certainly we are not making structural decisions to damage our assets or making decisions we will regret.”

We will keep an eye on copper to see where the price goes from here.


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