Rally in copper prices to accelerate as problems arise
As the three-month maturity value of copper prices jumped 1.7 percent, there is expectation of a rally in the copper market, though it is predicted to have a deficit for the first time in the last six years.
Amid speculations that copper prices are likely to go up, U.S. investment bank Goldman Sachs is anticipating that the rally in copper prices could accelerate with the onset of problems in major mining facilities in Peru and Chile and the tight supply caused by rising demands from China.Copper has functioned as a barometer, measuring the economic health of China, the largest commodity buyer. The world's second largest world economy, which has drawn a bumpy chart in recent years, has pioneered a drop in demand for the global commodity market. As a result of the Chinese central government's capital control decisions, many investors were unable to sell assets in the country.
However, in recent days a recovery in the giant economy has been observed. The London Metal Exchange (LME) quarterly copper metric ton prices were trading at $5.8, up about 0.4 percent earlier on Wednesday morning after gaining some 1.7 percent in the previous session to $5.925 and near a two-month peak of $6.007. The red metal quarterly prices traded in the LME were around $5.9.
3 pieces of bad news in a weekThe fluctuations in copper prices were experienced after the roads used by the Hong Kong-registered MMG Company to transport copper from the mine located near Peru's Las Bambas city were closed by demonstrators. In the first months of 2016 alone, MMG produced 300,000 tons of copper, which is only a small part of the 20 million tons of production in the world. However, the MMG report was the third piece of bad news for supply deterioration in the copper market this week. There has been similar news from the two largest mining companies in the world that will disrupt the balances in the copper market. A trade union leader making a statement to Reuters said that BHP Billiton, which is among the world's top producers of major commodities, including iron ore, metallurgical coal, copper and uranium, is starting to stop its activities before the planned strike in the world's largest Escondida copper mine in northern Chile.
In Indonesia, Freeport-McMoRan Inc., the largest copper and molybdenum producer in the world, warned that the amount of production in Grasberg, the second largest copper mine in the world, would be reduced. It is noteworthy that copper supply troubles around the same time that the Chinese economy has started to show signs of recovery.
According to a report by analysts at Goldman Sachs, the timing of the breakdowns in copper production in the Escondida and Grasberg mines was very important, adding that the effects will perceptibly show up during the next three months.
Furthermore, it was also indicated that, as copper stocks at present were already at very low levels, the miner strikes and other disruptions could lead to a widespread squeeze in the second quarter.
Goldman Sachs also warned that the 20-day strike of the Escondida workers and a one-month shipment delay from Grasberg could cause a loss of about 100,000 tons in global copper supply. This figure corresponds to 1.8 percent of the world's copper production in three months.
The bank also noted that Rio Tinto may have problems at the Bingham Canyon copper mine in Utah, where worker contracts are due in March. Risks arising from re-negotiations of business contracts might also recur in the fourth quarter of the year.
Amid speculations that copper prices are likely to go up, U.S. investment bank Goldman Sachs is anticipating that the rally in copper prices could accelerate with the onset of problems in major mining facilities in Peru and Chile and the tight supply caused by rising demands from China.Copper has functioned as a barometer, measuring the economic health of China, the largest commodity buyer. The world's second largest world economy, which has drawn a bumpy chart in recent years, has pioneered a drop in demand for the global commodity market. As a result of the Chinese central government's capital control decisions, many investors were unable to sell assets in the country.
However, in recent days a recovery in the giant economy has been observed. The London Metal Exchange (LME) quarterly copper metric ton prices were trading at $5.8, up about 0.4 percent earlier on Wednesday morning after gaining some 1.7 percent in the previous session to $5.925 and near a two-month peak of $6.007. The red metal quarterly prices traded in the LME were around $5.9.
3 pieces of bad news in a weekThe fluctuations in copper prices were experienced after the roads used by the Hong Kong-registered MMG Company to transport copper from the mine located near Peru's Las Bambas city were closed by demonstrators. In the first months of 2016 alone, MMG produced 300,000 tons of copper, which is only a small part of the 20 million tons of production in the world. However, the MMG report was the third piece of bad news for supply deterioration in the copper market this week. There has been similar news from the two largest mining companies in the world that will disrupt the balances in the copper market. A trade union leader making a statement to Reuters said that BHP Billiton, which is among the world's top producers of major commodities, including iron ore, metallurgical coal, copper and uranium, is starting to stop its activities before the planned strike in the world's largest Escondida copper mine in northern Chile.
In Indonesia, Freeport-McMoRan Inc., the largest copper and molybdenum producer in the world, warned that the amount of production in Grasberg, the second largest copper mine in the world, would be reduced. It is noteworthy that copper supply troubles around the same time that the Chinese economy has started to show signs of recovery.
According to a report by analysts at Goldman Sachs, the timing of the breakdowns in copper production in the Escondida and Grasberg mines was very important, adding that the effects will perceptibly show up during the next three months.
Furthermore, it was also indicated that, as copper stocks at present were already at very low levels, the miner strikes and other disruptions could lead to a widespread squeeze in the second quarter.
Goldman Sachs also warned that the 20-day strike of the Escondida workers and a one-month shipment delay from Grasberg could cause a loss of about 100,000 tons in global copper supply. This figure corresponds to 1.8 percent of the world's copper production in three months.
The bank also noted that Rio Tinto may have problems at the Bingham Canyon copper mine in Utah, where worker contracts are due in March. Risks arising from re-negotiations of business contracts might also recur in the fourth quarter of the year.
Last Update: February 10, 2017 22:43