Research

Forecasts and market analysis based on price assessments from Fastmarkets MB and Fastmarkets AMM

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November 2018 | Base Metals


Copper: Unsustainable price weakness


We maintain that weak copper prices disregard this market’s tightening fundamentals and prematurely discounts a slowdown in China’s economy and copper demand. Speculative positioning is underweight relative to the bullish supply/demand imbalance we model for 2018 and 2019, and concerns about China are overblown. This leaves room for positioning to ‘normalize’ and prices to rebound accordingly at some point. That could happen before the year-end on more robust Chinese economic data releases, or if sentiment at Asia Copper Week is sufficiently upbeat to provide a bullish wake-up call to complacent bears, or if the US and Chinese presidents make progress towards a trade deal when they meet later this month.

No respite for copper price pressure...
Copper is on track to record a fourth consecutive negative quarterly performance (-4% so far this quarter), as investors continue to struggle to navigate this unfriendly macro environment. As well as ongoing US-China trade tensions, copper has also been undermined by the resiliency of the dollar (close to its YTD high) and the weakness in oil prices (WTI down 22% from its October peak), thereby exerting disinflationary pressure on the broad-based commodity complex, including copper.

...despite fundamental indicators pointing to a tighter Q4

Global exchange inventories have declined by around 16,000 tonnes or 3%...

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