Bloomberg was out with a piece yesterday making a strong case for further copper strength. Copper’s prices have been underpinned by a number of factors even as equity markets tumbled into the end of last week. Here are a number of factors influencing copper buyers:
- The USD has been weak and that helps boost commodity prices including copper.
- Supply concerns are lingering especially in top producer Chile.
- There has been a sharp drawdown in stockpiles in LME tracked sheds and copper holdings have collapsed to lowest since 2005. Looking at outstanding orders to remove metal they haven’t bottomed yet.
- China has been boosting infrastructure spending after the fall out from COVID-19 which has been helping copper demand.
- Investors are gaining in excitement over copper with Citi just laying out a bull case for prices at $8000/ton. Alongside this CFTC figures show specs have kept adding to longs
- There are some bright copper-positives out there like US housing starts which have been doing well. Home building needs a fair bit of copper.
- Furthermore. the rise in green technology will be copper positive due to the high demand of copper in green technology.
This makes a good case for medium term copper buyers. In terms of where to join this move look for buyers on pullbacks in the near term. The main risks to this outlook are from any sharp reduction in demand on COVID-19 second spikes and related lockdowns.