Market Bellwether ‘Doctor Copper’ in the Spotlight

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Windsor/Adobe Stock

Copper is commonly considered to be a proxy for the general economy by metal analysts — hence the name “Dr. Copper.”

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During this last year, both political and supply and demand concerns have driven LME copper prices up. Despite a small price dip in May, those prices continued to increase in June.

Source: MetalMiner analysis of FastMarkets

After Donald Trump won the presidential election, copper rallied and surpassed its previous psychological price ceiling of $6,000/metric ton.

However, copper has failed to continue that initial uptrend.

Although copper supply concerns during the first quarter helped sustain price momentum, these same supply concerns eased in April and slowed copper’s price rise.

Most copper analysts believe copper prices will likely increase on the basis of fundamentals like  supply and demand only. Alternatively, MetalMiner sees copper prices declining, not as a result of fundamentals, per se, but as a result of a rising U.S. dollar index (USD) and a falling commodities index (placing the historical inverse relationship between the USD index and commodities back in play).

Chinese demand has improved during June, and, consequently, prices increased this month. However, current economic indicators suggest this demand may fall, which would cause copper prices to slip.

Automotive sales within China have risen from April to May, which may have provided a short-term lift in copper prices. However, if analyzing automotive sales compared to last year’s data, sales have only held steady; therefore, we do not see a growing automotive sector or increased demand for copper and the subsequent lift in copper prices.

Free Download: The June 2017 MMI Report

It should come as no surprise then that even  “Dr. Copper” has reflected a price uptrend this June — but future prices may not be as bright as expected for copper traders.

Buying organizations will want to evaluate indicators this month and follow the detailed analysis in our monthly forecast reports.

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