Copper MMI Rises On Oil Rally, Is it For Real?

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Our Copper MMI jumped 5% to 62 points. Copper prices finally made some gains in March, rising to the highest level in four months. So what’s causing copper prices to rise? and, is this finally a legit rally?

Fundamentals Improving?

Trade data showed some glimmers of optimism for copper producers as China’s February copper imports surged 50% year-over-year. Many people see the rise in imports as a sign of demand picking up. However, while imports rose, Shanghai Futures Exchange inventory levels hit new records. This seems to suggest that Chinese copper imports are rising but they aren’t backed by end-user demand.


There are also opinions that copper is rising on expectations of a future supply deficit. Some people believe that the market will get into deficit in 2017 as no new mines came onstream due to low prices.

Compare Prices With The March 2016 MMI Report

However, those are just long-term expectations and things might end up looking quite different to what people are forecasting now. So far, most would agree that copper-output cuts spurred by lower prices aren’t enough to end a surplus this year.

It’s All About Oil

You can drive yourself crazy finding the reasons that explain the oil rally. Indeed, you can probably find fundamental reasons to be either bullish or bearish on copper. However, in a market driven my macro-factors, it’s quite clear to us that this rally is not reflecting a change in copper’s fundamentals.

Crude oil (in black) versus copper (in blue) 1 year out

Crude oil (in black) versus copper (in blue), one-year out. Source:

In the chart above we can see the huge correlation between copper and oil prices. Rising oil prices are the main explanation for rising copper prices. Investors are keeping a close eye on oil and its price movements have a huge impact on the performance of other commodities, including copper.

Legitimate Rally?

We recently pointed out that oil prices could struggle near $40/barrel and pull back. Over the past few days we just saw that, oil falling back down to the $30s, which also brought copper back below $5,000/mt.

Free Sample Report: Our April Metal Buying Outlook

Copper’s rally is still normal in the context of a bear market. Indeed, exactly one year ago we saw a similar rally in copper prices that soon enough translated into a price slump. The beginning of March was a good opportunity to buy some volume but it’s still not clear if copper will be able to trade well above today’s levels. That will likely depend on the fate of oil prices and investors’ sentiment on commodity markets.

Actual Copper Prices and Trends

Copper prices rose worldwide. The Chinese copper primary cash was the big winner, rising  5% to $5,881 per metric ton. The Japanese copper primary rose 3% to $5,146 per mt from the previous month. Indian copper prices rose 2% from $4.83 per kilogram to $4.92 per kg.  LME primary, 3 month-delivery copper rose 2% to $4,820 per mt.

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