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

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December 2019 | Base Metals

Copper: Rebound to continue in near term

Copper prices have rebounded well since September, despite an unsupportive macro environment. We attribute the rebound to tighter fundamentals, which have mattered increasingly more in recent months. With copper’s speculative positioning remaining too stretched on the short side and a restocking phase likely to occur in the first quarter of next year, we continue to expect a strong short-covering rally in the months ahead.

Trading regime
To assess the relative weight of macroeconomic factors versus fundamental factors on copper returns, we run a cross-correlation analysis. We compute the correlation of daily returns of copper and daily returns of the other five base metals on the LME. This cross-correlation has declined steeply from the start of October to nearly 0, which suggests that the macro has become less impactful on copper returns and the fundamental matter more.

Fundamental backdrop

The ‘apparent’ deficit in the global refined copper market has deepened this year, according to the ICSG. It pegs the deficit at 330,000 tonnes in the first...


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