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Copper Roundup: Trade Talks, Inventory Levels and Electric Vehicles

Copper Roundup: Trade Talks, Inventory Levels and Electric Vehicles

Copper prices fell Friday and Monday, falling from the 10-month highs seen on Thursday. A key factor to the recent negative swing points to a report that Chinese leaders have decided to focus on structural economic reforms rather than stimulus measures.

The recent drop in price is not changing the outlook for copper. The expectation of higher prices remains supported by reports of a May breakthrough in the U.S.-China trade negotiations. The red metal is holding above the 55-day moving average at 2.8877, as it has done since January 29.

Copper opened this morning at just over $2.90 a pound. Click on the chart below for up-to-the-minute pricing from MacroTrends Trading View.

“The red metal is now in wait and see mode,” states frequent tED contributor Andrew Hecht of Seeking Alpha. “But at above $2.90, the red metal is still signaling that the prospects for economic growth are high. Technical indicators are in neutral territory when it comes to both price momentum and relative strength. Optimism on trade lifts the price, and the lack of any news has caused it to drift lower over recent trading sessions.”

Investors appear to still be bullish on copper, raising their net long positions to the highest in three weeks, according to Commodity Futures Trading Commission (CFTC) data released last week.

Inventory Levels

Copper inventories at a few key exchanges are providing mixed reviews for copper. Levels at the London Metal Exchange were at 189,225 tons as recently as last week. This after peaking at nearly 200,000 early this month after falling to 110,000 metric tons in the middle of March. Inventory at the Shanghai Futures Exchange warehouses fell for a third straight week last week, dropping 3.4% to 236,734 tons, according to Bloomberg reports. COMEX copper inventories have declined as well – from 70,000 metric tons to 37,497 tons as of the end of last week.

What does all of this talk of inventory levels mean? All of this points to the fact that the demand for copper remains strong.

Here are more numbers to support that thought. China imported 391,000 tons of unwrought copper in March. That is up by 25.7 percent from the previous month and 26.5 percent higher than a year earlier which weighed on prices. However, robust economic data by China and the chances of a possible trade deal between the U.S. and China restricted the downside for the red metal prices. Moreover, an increase in demand for copper as a key component of electric vehicles might support the prices.

Could EVs push us to “a world without copper”?

“Even if we mined every last discovered, and undiscovered, pound of land-based copper, the expected 8.2 billion people in the developing world would only get three-quarters of the way towards copper use parity per capita with the US if we assume 10 billion people by 2050.”

This is an excerpt from an article on Investing.com by Richard Mills. He writes about electric vehicles getting a boost from big auto. You have to read a bit as he sets up the story, but he has some really good thoughts about the future of the copper, and possibly “a world without copper.” Here is his article.

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Jim Williams

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