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Copper Report: Waiting on G-20 Summit

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Copper Report: Waiting on G-20 Summit

Copper remained steady in overnight trading. This seems to be the trend as investors are waiting for the other shoe to drop – that shoe, metaphorically, being the upcoming G-20 summit later this month in Japan.

Concerns that demand is weakening, and could take a further hit from U.S.-China trade tensions, are overriding the increased pressure on prices from stalling supply. Commerce Secretary Wilbur Ross told The Wall Street Journal on Sunday that presidents Trump and Xi Jinping are unlikely to strike a major trade deal if they meet at the summit in Osaka.

Three-month copper on the London Metal Exchange edged up 0.1% in overnight trading. Here in the states, copper opened for trading this morning near $2.65 a pound.

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Mine Your Business

Not even a string of work stoppages at mines around the world has influenced the price of copper. Typically, any hint of labor woes sends the red metal higher.

Chile’s Codelco said its Chuquicamata mine was maintaining output at 50% of capacity after more than 3,000 unionized workers walked off the job on Friday. Signs of a lingering strike “should see copper prices well supported, despite the market’s focus on the gloomy economic backdrop,” ANZ wrote in a note. “Supply shortages were exacerbated by data showing Chinese output fell,” it added.

Chuquicamata produced 320,744 tons of copper last year.

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Glencore PLC said Monday it will be shutting down production at its Mopani copper smelter in Zambia due to “a significant failure” in one of its furnaces leading to a “major refurbishment program” expected to last until the end of this year.

Indonesian copper miner Amman Mineral Nusa Tenggara said it expected to export about 236,000 tons of copper concentrate in 2019, below its export quota, as it increases supplies to a local smelter.

Then There’s the Fed

The G-20 isn’t the only thing keeping investors at bay. One eye may be on Japan, but the other one is watching to see what happens tomorrow after the conclusion of the U.S. Federal Reserve’s two-day interest rate meeting.

According to Reuters, the U.S. Federal Reserve, facing fresh demands by President Donald Trump to cut interest rates, is expected to leave borrowing costs unchanged at its upcoming policy meeting but possibly lay the groundwork for a rate cut later this year.

Lower interest rates tend to push commodity prices higher as they mean lower inventory financing costs, but analysts say the Fed is unlikely to cut rates this week.

The ‘Other’ Central Bank

European Central Bank (ECB) President Mario Draghi announced he is ready to launch another round of stimulus, saying the central bank could cut interest rates again or provide further asset purchases if inflation doesn’t reach its target.

Speaking at the ECB’s annual symposium in Sintra, Portugal, Draghi said policymakers would discuss how to react to the downturn in the coming weeks, stressing that any efforts by the central bank should be coupled with more action from governments to ward off weak growth and low inflation.

“Monetary policy can always achieve its objective alone but, especially in Europe where public sectors are large, it can do so faster and with fewer side effects if fiscal policies are aligned with it,” the ECB president said.

President Trump was quick to respond, suggesting that Europe was engaging in currency manipulation. “Mario Draghi just announced more stimulus could come, which immediately dropped the Euro against the Dollar, making it unfairly easier for them to compete against the USA,” President Trump tweeted. “They have been getting away with this for years, along with China and others.”

The euro sank nearly 0.5% following the comments at the ECB Forum.

 

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Jim Williams

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