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The Speech Heard Around the World

By Jim Williams

The eyes of the world were on President Donald Trump last night as he addressed Congress for the first time. Copper investors were watching as well.

The red metal has spiked in early morning trading after President Trump said he will ask Congress to pass a bill that would lead to $1 trillion in investments in a national infrastructure program.

President Trump’s campaign promises have boosted copper prices at a growing rate of 5.3 percent since the November election. Several analysts believe this spike in copper prices will not have much of an influence on copper prices in the long term.

Other key factors to add to the recent success of copper are the lingering copper mine strike in Chile, negotiating problems in Indonesia and good news out of China after the first quarter of 2017. Here is a deeper look at the three main developments currently helping copper.

Workers strike in Chile
The strike at the Escondida mine in Chile is in its third week as miners walked out because of their benefits and compensation.

The Escondida mine is the world’s largest copper mine, accounting for about 5 percent of global production.

Disruptions at this mine are expected to push copper prices to $3 a pound.

Previous strikes by workers at the Escondida mine in 2006 and 2011 have paralyzed production for nearly a month. Patricio Tapia, the union leader at the Escondida mine, has said workers are prepared to strike for up to two months if necessary.

Copper mining in Indonesia
Issues relating to export permits for copper mining in Indonesia also continue to put a strain on the   copper supply. Freeport-McMoRan, the Phoenix-based mining company operating the Grasberg mine in Indonesia, are facing trouble exporting copper out of the country because of a ban on ore concentrate exports imposed by the Indonesian government in January.

Freeport was to be granted a temporary permit to continue its export operations, but so far, the negotiations with the Indonesian government have not been helpful. Word is that Freeport is considering cutting back on production.

China’s role as an importer
China, considered the world’s leading copper-importing nation, is expected to increase its demand in 2017. Imports from Chile into China increased 26.7 percent during 2016. Analysts predict the demand will continue to grow, maybe as soon as this upcoming second quarter.

Adding to the good news out of China, the Chinese manufacturing PMI data in February was at three-month highs.

What’s the future of copper prices?
All of this bodes well for copper, but as anyone who has been watching the commodity for any length of time knows, the trend could quickly change. President Trump’s speech to Congress was a good step to continued success. All those eyes on Capitol Hill last night now may shift to see what happens with relations between the United States and China under the Trump administration. We will monitor the situation and report any significant impacts to the price of copper right here.

 

 

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