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Red Metal Rally Fueled by Chinese Data

Red Metal Rally Fueled by Chinese Data

By Jim Williams

Copper prices rallied on Tuesday after improved manufacturing data from China bolstered sentiment. Despite the surge, experts expect the gains will be capped by seasonal demand weakness ahead and the strength of the dollar.

Copper on the London Metal Exchange (LME) ended up more than two percent at $5,780 a ton. The metal used in power and construction had closed at $5,654 on Monday after hitting a three-month low of $5,642.50.

The HSBC/Markit Flash China manufacturing PMI showed contraction, but it also suggested stabilization. The new orders component showed expansion, while export orders fell at a slower pace.

“The new orders and export numbers suggest a boost for industrial activity and metal use,” said Caroline Bain, senior commodities economist at Capital Economics. “The stimulus we’ve already seen in China is starting to come through in the data…But it’s still within the context of China meeting its seven percent growth target; it doesn’t mean the economy is going to take off.”

Historically, China’s demand for industrial metals slows in the third quarter.

The higher US currency makes commodities such as copper more expensive for companies based outside the United States.

Analysts are forecasting a firming overseas trend of copper prices despite speculation a deal is near between Greece and its euro-area creditors.

Tom Price from Morgan Stanley told Financial Times, “The dominant new factor that has weighed on base metal over the last four to five weeks probably relates to the growing risk around Greece. Conflict…over a debt resolution has undermined confidence in the global growth outlook again.” You can read the entire article, ‘Copper’s supply glut takes shine off short-term price outlook’ here.

In one of the best graphics we’ve seen in a long time, the Visual Capitalist looks at ‘The Looming Copper Supply Crunch’ with a full-page graphic followed by a lengthy description about the ‘problem’ of copper not being discovered fast enough to meet upcoming demand.

For the current price of copper and up-to-the-minute charts, click here.

 

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