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Copper Holds Nine-Year High as Metal Hits Pause Button

Copper futures are hitting the pause button on their incredible 2021 rally, although they continue to hold at a nine-year peak. The industrial metal is joining the drop in the broader financial markets, mainly from profit-taking and waiting for news on US fiscal stimulus. But positive economic data and strengthening Chinese demand might suggest that this is merely a minor drop in a long-term bull market.

March copper futures tumbled $0.0345, or 0.9%, to $3.7995 per pound at 14:41 GMT on Wednesday on the New York Mercantile Exchange. The red metal has advanced about 3% over the last week, adding to its year-to-date surge of more than 8%.

Copper markets have soared to their best levels since 2012, placing $4 in their sights. The monumental rally in the industrial metal has been driven by concerns over a market deficit caused by tighter suppliers and strengthening demand.

But how much could the deficit widen? According to Bloomberg Intelligence, the shortfall could total approximately 500,000 tons when 5% demand growth and the latest production guidance are factored into the estimates.

With factories in China staying open during the Lunar New Year holiday, copper demand has remained elevated. This is usually a slow period for industrial activities. Plus, in South America, the coronavirus pandemic has impacted output in some of the key copper-producing nations.

Although low inventory levels have been a primary concern in warehouses registered by the London Metal Exchange (LME), the latest numbers suggested that stocks edged up to 76,173. On the other hand, copper supplies at warehouses monitored by the Shanghai Futures Exchange have slumped 60% in the last eight months to below 80,000 tons.

A stronger greenback in the middle of the trading week sent copper prices lower. The US Dollar Index, which measures the buck against a basket of currencies, advanced 0.56% to 91.02, from an opening of 90.49. A higher buck is bad for commodities priced in dollars because it makes it more expensive for foreign investors to purchase.

On the data front, the US government reported that industrial output rose 0.9% in January, while manufacturing production jumped 1%. Capacity utilization surged to 75.6%.

Investors are waiting for news on the latest $1.9 trillion fiscal stimulus and relief package. In the meantime, traders are taking profits, and perhaps waiting for the next entry point to buy copper futures.

In other metal markets, April gold futures dropped $22.60, or 1.26%, to $1,776.40 per ounce. March silver futures declined $0.195, or 0.71%, to $27.13 an ounce. March platinum futures plunged $24.90, or 1.95%, to $1,254.70 an ounce. March palladium futures slid $11.70, or 0.49%, to $2,376.50 per ounce.

If you have any questions and comments on commodities today, use the form below to reply.


© AndrewMoran for Commodity Blog, 2021. | Permalink | No comment |
Published under: Copper

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