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Moving the Copper Needle…Not So Fast

Moving the Copper Needle…Not So Fast

By Jim Williams

Last week’s Federal Reserve meeting didn’t move the copper needle very much. Neither did Monday’s Presidential Debate. What is it going to take to push the price of copper over the hump of around $2.15 a pound?

“It is the new normal,” Randy Goodman, Greenland America Inc., said about copper’s lower highs at last week’s Institute of Scrap Recycling Industries’ Annual Commodity Roundtable in Chicago.

“Lower prices, muted demand and supply shortages are the environment in which we are now dealing with,” Chris Lewon, Utah Metal Works, told attendees. “Flows are unlikely to change either up or down. Rather, copper markets will be bumping along the bottom area, similar to what has been seen over the past few months.”

Ed Meir, an analyst with Intl FC Stone, focused his comments at ISRI on China. “If you look at 2016, China didn’t really fall apart. I thought they would have a real hard time. They pumped a lot of credit and liquidity to grow their economy. Authorities are throwing credit and hoping the economy is growing, but there are mixed results.”

Those mixed results are still enough to make China the key player in the game of pricing copper. China’s economy grew last year by 6.9 percent. They are on pace to grow an additional 6.0 percent this year. As a result, all eyes must remain on China.

“China has made strategic investments all over the globe with a goal of securing commodities in a world where competition for finite goods is rising alongside population,” states Andrew Hecht  of Seeking Alpha. “Chinese businesses are patient; they rarely make strategic commodity investments on the highs. But when the prices of raw materials move lower, they always seem to be ready to pounce.

“From a longer-term perspective, it is not a time to get excited about the prospects for copper,” Hecht surmises. “There will come a time where copper has a place in an investment portfolio but this is not the time.”

In Other News
Fed Chair Janet Yellen delivered her semi-annual testimony this morning before the House Financial Services Committee. U.S. Fed Presidents Neel Kashkari, James Bullard, Charles Evans, Loretta Mester and Esther George were also scheduled to speak about community banking, the economic outlook and policy.

We will follow up on the meeting and report any pertinent information in next week’s column.

 

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