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Copper: Trade Talks Heating Up

Copper: Trade Talks Heating Up

Copper prices rose on Monday as the positive vibes from Friday carried over into this week. First, news broke overnight that a Chinese state-backed tabloid is saying that China and the United States are “very close” to an initial trade agreement. Then, reports this morning say leaders of the U.S.-China trade negotiations held another phone call on Tuesday morning. Both of these developments continue the momentum from Friday when the presidents of both countries restated their desire for a deal.

Frequent contributor Andrew Hecht of Seeking Alpha remains optimistic, but also realistic when it comes to the trade talks. “Optimism could quickly shift to pessimism again as it did in early August when President Trump became frustrated with Chinese backtracking and the lack of progress in negotiations, he slapped a new round of tariffs on China,” states Hecht. “The Asian nation promptly retaliated. If the prospects for a “phase one” deal fall through, we could see another correction. However, if the two sides sign an agreement, the path of least resistance should continue to be higher,” concludes Hecht.

Trade talks are not the only thing impacting the red metal. It is still business as usual – well, as usual as possible these days – as a sharp decline in available stocks in London Metal Exchange (LME) warehouses and manufacturing data also play a role in the price of copper.

Data released Friday showed U.S. manufacturing output accelerated in November to its fastest pace in seven months. Today, investors are keeping an eye on the U.S. data front again, with new home sales expected to jump and consumer confidence figures set to be released.

As of right now, copper prices are down about 20% from last year’s high. The red metal opened this morning just under $2.65 a pound. Click on the chart below for up-to-the-minute pricing.

Protests Continue in Chile

The headlines typically scream “Trade Talks!” or “Data from China!” What most people don’t see, is the grassroots core that keeps copper ‘flowing’ to the world – the mining industry. For instance, did you know that a lot of miners across Chile are on strike? This time it isn’t about mining conditions. The miners are supporting their union brothers and sisters upset about transportation costs in Chile.

Chile’s copper mines have mostly maintained production and kept operations running normally with limited incidents reported. While most mines are in remote areas, many close to the situation are worried that continued rioting could hurt operations that make Chile responsible for around 28% of global copper production.

Further Reading

As the calendar starts to wind down towards the end of 2019, Reuters decided to take a poll to see what the price of copper will look like in 2020. The words “stifled” and “growth fears” are in the headline. You can read the article here.

Also read Andy Home from Seeking Alpha’s article: Funds are starting to turn more bullish on copper.

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Jim Williams

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