Exclusive Features

Copper: The Headline Hype

By Jim Williams

Copper on the Rise

Copper Prices Make a Comeback

Copper Prices Mounting a Comeback on Economic Confidence

An Exciting Week for Copper Bulls: Now What?

Copper Rises on China Demand

These are the headlines you see when copper sees a 3.3% increase in a week to top out at $3.20 a pound at the end of trading Monday.

The red metal made significant strides last week based on investors growing more confident about the global economy.

The Wall Street Journal says the driving factor behind the surge was a statement from commodities trading house and miner Glencore Plc forecasting strong demand from both China and the United States for copper.

As quoted in the publication:

“Prices rose…last week, after a major commodities trading house surprised markets with an upbeat forecast for copper demand in the second half of this year, while data from the U.S. show an economic rebound is gaining traction.”

Glencore’s comments “brought in a whole lot of new investors, and the U.S. data helped keep the rally going,” said Bob Haberkorn, a broker at RJO Futures. “This was a market that was trending lower, and now it’s turned around.”

Fran├žois Bourdon, chief investment officer for Fiera Capital, a Montreal-based asset manager overseeing $80 billion put the onus directly on the United States, “In our mind, it’s going to be the U.S. story driving commodity prices from this point, rather than China.”

This opinion is based on better-than-expected data from the U.S. showing factory activity at its highest pace of expansion since April 2010, while existing-home sales rose for a fourth-straight month. Copper is used extensively in manufacturing, making it sensitive to economic fluctuations. The U.S. is the world’s second-largest consumer of the metal.

Regular contributor Michael Turek, director of metals at Newedge says the comments from Glencore “lent much needed credibility to recent prognostications about improving fundamentals. “Demand, as evidenced by recent (U.S.) housing and auto data, seems solid while fractured supply is starting to be felt.”

Some investors also believe China, the world’s largest consumer of the metal, may be preparing to launch a second round of economic stimulus, which could further boost copper demand. Copper’s rally has nearly reversed a sharp drop recorded earlier this month, although prices are still down about 7% for the year.

With Chinese economic growth expected to slow from the blistering pace of the last few decades, investors have been looking to the U.S. to take up some of the slack. U.S. copper demand is expected to grow by 4.4% this year, the fastest pace since 2010, and is on track to expand for two consecutive years for the first time since 2000, according to Morgan Stanley.

“The copper market seems to be looking past the poor Chinese numbers towards expectations of more economic stimulus,” said Eugen Weinberg, an analyst at Commerzbank.

We will keep an eye on the markets, and the headlines, and keep you posted throughout the rest of 2014.

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