Copper MMI: Uncertain demand continues to moderate copper price gains

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The Copper Monthly Metals Index (MMI) increased by three points this month to 76, the highest value seen since hitting 78 in May. Individual price increases in the Copper MMI basket fell in the range of roughly 1-6%.

LME copper prices managed to regain the $6,200 level but proceeded to move sideways from there due to a lack of further indications regarding a pickup in demand.

Source: MetalMiner analysis of London Metal Exchange (LME) and FastMarkets

From a longer-term perspective, copper prices do not appear particularly strong, but they have not dropped all the way back to 2016 price levels — indicating some level of supply dynamics is still at work and supporting prices.

Source: MetalMiner analysis of FastMarkets

Overall, recent weekly trading volumes looked positive overall but muted from a volume perspective, indicating limited support at this time for the recent uptrend (reflected in the sideways turn in the second half of December).

SHFE copper prices finally break six-month sideways trading band

Like LME prices, SHFE copper prices broke out of a short-term sideways trading band that formed in June and are now trading higher.

Source: MetalMiner analysis of FastMarkets

Breaking the next critical resistance level of CNY 50,000/mt will provide a clearer signal that higher prices will hold throughout Q1 2020.

Source: MetalMiner analysis of FastMarkets

Positive reports regarding a pickup in manufacturing demand late in the year supported prices.

Additionally, recent government measures — particularly monetary easing — appeared to support construction demand, a positive development for copper prices.

Demand for copper, a critical industrial, automotive, and construction metal, will remain high.

Current prices remain supported from a long-term perspective, even in the weaker demand environment seen since last year.

Source: U.S. FRED

Chinese construction demand corresponded with noticeable price increases beginning in 2004. That was followed by a drastic decline in prices and trading volumes in 2008-2009, corresponding to the timing of the global recession, which stalled out property growth in China.

While copper presently trades with lower volumes than during the peak years of China’s construction activity, overall copper trading volumes remain higher than during past decades. Baseline demand should continue to support the somewhat higher copper price level. Falling mining output also matters but may exert less immediate impact on prices.

Looking at the long-term chart of price values provides some sense of the metal’s price downside,  upside risk and potential volatility.

Assuming that supply moves toward surplus, as projected for the year by the International Copper Study Group (ICSG) according to its October annual forecast for 2020, it may be difficult for copper prices to increase this year unless demand improves, despite the long-term downtrend in mine supply.

What this means for industrial buyers

Copper prices increased but then stalled out and have not yet regained momentum.

With prices already somewhat higher, industrial buying organizations will need to watch the prices carefully from here for further increases.

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Buying organizations seeking more monthly insight into copper price trends can learn more about our MetalMiner Monthly Buying Outlook.

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Actual copper prices and trends

Copper prices increased across the board this month, with the LME primary three-month price showing the largest gain at 5.8%, to $6,215/mt. Japan’s primary cash price increased by 5.4% to $6,421/mt.

China’s primary cash and copper wire prices both increased by 4.6%, up to $7,045/mt and $7,040/mt, respectively. China’s copper bar price increased by 4.5% to $7,034/mt. China’s copper #2 scrap price increased by 1.0% — the weakest increase in the index this month — to $5,514/mt.

U.S. producer copper grade 110 and grade 122 increased by 4.3%, both now at $3.62 per pound. U.S. producer copper grade 102 increased by 4.1% to $3.84 per pound.

Korean copper strip increased by 2.8% to $8.14 per kilogram.

The Indian copper cash price increased by 2.3% to $6.20 per kilogram.

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