Copper MMI® Rallies Again, a Recovery? Too Early to Tell

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Is this a serious rebound in copper prices? Hmm… we still doubt it.

The monthly Copper MMI® registered a value of 77 in May, an increase of 2.7% from 75 in April.

Not a Demand-Based Surge

Copper prices have surged so far this year but prices are still well below what they were just a year ago.

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Demand coming from China is still weak. We believe that traders likely won’t get evidence of a meaningful uptick in demand as Chinese demand remains weak and not likely to make a significant comeback in the medium term. Therefore, demand alone has little chances of supporting prices through the balance of the year.

Supply Side? Nope

On the supply side, there have been some constraints in Chile (the largest copper producing nation) because of climate and labor problems. On the other hand, major copper miners are cutting costs. This helps miners keep producing even while copper prices fall, as major input costs like crude oil declined. Just this year, the industry’s total costs on average fell 6%. The industry seems well-supplied and at this point, we don’t see warnings in the supply side with the potential to dramatically change the direction of prices.

What IS Causing the Rally?

With this said, two things seem to be causing the recent copper’s rally:

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