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Trade Talks Move the Copper Needle…Slightly

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Trade Talks Move the Copper Needle…Slightly

Friday’s “Phase One” agreement between the U.S. and China created some optimism in copper trading, but the overall reaction still appears to be more of a wait-and-see approach.

Copper prices bounced back and forth Monday, and in overnight trading, on signs of progress in U.S.-China trade talks and supply disruptions in parts of South America, but any gains were dampened by disappointing Chinese import/export data and continued caution surrounding a final trade deal.

As you are most likely aware by now, President Donald Trump on Friday outlined the first phase of a deal to end a trade war with China and suspended a threatened tariff hike that was scheduled to go into effect today. This “phase” raised hopes in the 15-month dispute that has caused the red metal to have ongoing Jekyll and Hyde moments almost every day waiting for the talks to gain momentum one way or the other.

“Despite the recent progress on the deal, trade tensions between China and the United States are unlikely to end completely and risks are likely to linger in the next phase of negotiations,” ANZ analyst Soni Kumari told Reuters. “Against such a backdrop, the market will be considering (China’s) upcoming hard economic data more seriously than news on the trade deal,” Kumari added.

Copper opened this morning at $2.61 a pound. Click on the chart below for up-to-the-minute pricing.

While the world waits to see which way the markets will go, copper is trying to keep on keeping on, as it is business as usual – well, as much as possible – for the red metal. Trade talks are not the only thing influencing copper.

As Soni Kumari mentioned above, trade data released Monday from top consumer China reinforced concerns about demand for industrial metals, specifically, copper. Benchmark copper on the London Metal Exchange was down 0.8% yesterday, and is now down 10% since hitting its highest level of the year just a few months ago.

“Chinese trade data shows demand domestically and globally is weak and though it looks as if we are moving in the right direction on the trade talks, there was nothing specific for metals,” BMO Capital markets analyst Kash Kamal told Reuters. “However, preliminary numbers showed rising imports of copper concentrates … domestic demand in pockets is improving because of the stimulus that has been injected into the Chinese economy through the year.”

Further support for copper came from news that Chinese miner MMG might halt production at its Las Bambas mine in Peru because protesters are blocking access to the site. Also on the radar is the prospect of a strike at small Chilean copper mine Antucoya, owned by Antofagasta Minerals, after contract negotiations broke down.

It is not all gloom and doom when it comes to mining. A new copper mine in Peru looks to produce the red metal and “print money” over the next 100 years. Check out the Financial Times article here.

In Other News – Brexit

EU negotiator Michel Barnier told reporters a Brexit deal “is still this week,” even though reaching an agreement is proving more difficult than anticipated. Barnier says talks have been “intense over the weekend and yesterday” and that “work has just started now today.”

We will keep an eye on all things copper and report any impactful news right here next week.

 

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Jim Williams

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