Copper Investing News

By Leia Michele Toovey- Exclusive to Copper Investing News

Copper joined the pack in the mid-week revival of base metal prices.

On Tuesday, the red metal hit a 6-month low of $7,150 a tonne with the frenzied sell off of commodities. However, profit-taking since then on short covering purchases, and higher oil has turned the price around.

On Thursday, three-month copper on the London Metal Exchange traded at $7,590 a tonne, up even further from the $7,400 it hit on Wednesday’s close. On the MCX, Indian copper futures rose more than 2 per cent on Thursday. Benchmark August copper MCCQ8 was up 1.42 per cent at $7.4 from its previous close.

The rise in copper was in unison with the rise of the other base metals, as hiking oil prices extended support. Oil jumped to above $116 a barrel on Thursday, extending gains after a $3 rise the previous session.  A larger than expected drop in the U.S. crude and gasoline inventories and supply threats from the Georgia and Russian battles as well as the refinery slow downs in the wake of Storm Eduard added to oil’s upswing. All industrial metals in the short term will be sensitive to the fluctuations in crude’s price. In addition, short term positions as investors buy into metals as they believe they have bottomed out, will paint a volatile picture for prices.

In the long term, however, worries about Chinese demand still linger.  Markets are closely watching industrial activity in China, where data showed factory output growth had slowed to 14.7 per cent in July, a 19-month low, as manufacturers struggled with weakening export demand. Industrial production data is a strong indicator of metals demand. One of China’s biggest export markets is the United States, where a housing market slump has hit copper demand. Stocks in the LME warehouses, which are at 6-month highs around 153,000 tonnes, and news that the European economy contracted in the second quarter will affect the long term trend.

Chinese authorities have asked their top copper producer, Jiangxi Copper Co. to reduce its power consumption. China’s power generation growth in July eased further from June to its lowest in over six years. Supply woes have forced nearly half the nation to ration power. Rationing has escalated due to the Olympics as Beijing aims to secure electricity supply for Olympic-related activities, and curb air pollution by forcing small generators to shutdown.

Jiangxi has the capacity to produce 700,000 tonnes of refined copper a year, and imports some copper for its product plants. In order to cut their August power consumption, they will have to cut output by up to 30 per cent. Jiangxi Copper will try to maintain normal production of refined copper, and instead cut imports of refined copper because their semi-finished product market has dropped. Copper production in China turned around and fell 0.2 per cent in July after hitting a 7-month high in June, due to power shortages

Copper thefts have become a widespread, global problem. To help combat this, the Australian government has launched a new campaign.  The surging price of copper is the surging demand for copper in China and India has pushed the price of scrap copper to $8,000 per tonne in Australia, leading to widespread theft, particularly from electricity, telecommunications and rail networks in NSW, Victoria, South Australia and the Australian Capital Territory. Authorities are asking for the public’s help because, as well as the cost to business, it is the public who are affected. The new campaign, supported by state governments as well as the commonwealth, will feature national television advertising, signage and stickers.