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Scheduled Trade Talks Give Copper a Shot in the Arm

Scheduled Trade Talks Give Copper a Shot in the Arm

London copper prices inched higher in overnight trading after U.S. Treasury Secretary Steven Mnuchin said he would meet Chinese Vice Premier Liu He for trade talks in two weeks.

Copper, often called Dr. Copper because the red metal is considered the barometer for economic health, has in recent months followed the ebb and flow of the on-again, off-again trade talks between the world’s two biggest economies.

The flow increased yesterday when Secretary Mnuchin said that he and U.S. Trade Representative Robert Lighthizer would meet with China’s Vice Premier in October as originally planned.

A U.S–China trade deal appeared dead in the water this past Friday after Chinese officials unexpectedly cancelled a visit to farms in Montana and Nebraska, as deputy trade negotiators wrapped up two days of negotiations in Washington D.C.

“The bottom line is that the price direction of the industrial metal depends on the next development in the trade war and its impact on China’s economy,” says frequent tED contributor Andrew Hecht of Seeking Alpha. “Trade between the U.S. and China could be the only substantial factor that will impact the price over the rest of 2019.

“I like the prospects for the price of copper. I believe that a trade deal will eventually take the price of copper higher, but it could be a bumpy road until the two sides reach an agreement.”

Copper opened this morning up a tick at 0.19% at $2.614 a pound. Click on the chart from Investing.com for up-to-the-minute pricing.

ICSG Report Shows Demand Is Down

The positive news of trade talks follows a report showing weaker demand for copper. Data from the latest International Copper Study Group shows the global refined copper market recorded a 21,000-ton deficit in June, compared with a 70,000-ton deficit in May.

“While the longer-term view into next year for metals may be positive, it looks likely that there will be further downside pressure on prices in the short term,” Malcolm Freeman, director of Kingdom Futures, said in a note.

Copper Getting a Boost from China?

In other developing news overnight, China’s central bank said maintaining a cautious approach is key to stimulating the economy. Ning Jizhe, a vice head of the state planner for China, said the country will step up efforts to stabilize growth, adding that authorities will speed up construction of investment projects and relax restrictions on auto purchases.

Further Reading

Japan’s top copper smelter predicts a shrinking copper shortage by 2020. Naoki Kojima, GM marketing of Pan Pacific Copper (PPC), told Reuters that PPC projects the global consumption and supply of refined copper to climb by 1.5% and 1.7% respectively in 2020 compared with this year. He said that “China’s demand will continue to grow next year, but at a slower pace than this year…Still, Beijing’s economic stimulus, such as hefty spending in infrastructure and deregulation to bolster car purchases, will support metal demand.” You can read the entire article here.

Another article on Steel Guru predicts Peru’s copper production to surge between now and 2022.

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Jim Williams

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