Copper Futures rally back, 50% above March lows – Charles Schwab

Since mid-March, copper futures have managed to post price advances in 14 out of 16 weeks as prices for the leading indicator rallied off multi-year lows near $2.00 per pound. The move is attributed to a ramp-up in Chinese buying and supply challenges ranging from labor disputes to pandemic-related shutdowns, per Charles Schwab.

Key quotes

“While Asia in general accounts for 68% of global use, China specifically is the key demand growth variable to monitor. Data from earlier in the week showed China revving up their copper consumption machine as June copper imports ballooned to a new record high. Their annual growth in copper demand was 5.7% in 2018, 1.2% last year, and was estimated to rebound to 2.6% this year before the health concerns took hold.”

“The supply variable for copper coming out of South America remains a persistent challenge, but labor disputes at Chilean mines may see some resolution as the collective bargaining process may lead to mediation. Lower energy costs may provide a tailwind for miners, and months-long pandemic-related shutdowns may end, bringing back production for major producer Peru.”

“For the mining industry, labor relations and the growing focus on health, environmental, and social factors make mining more difficult. Analysts had seen 2020 bringing a supply deficit when compared to demand, but those estimates are now called into question.”

“Technicians may see September copper futures leaning into overbought territory with the RSI above 70. September copper tested a psychological resistance early this week with prints of $2.99, but couldn’t pierce the $3.00 level. Momentum studies have slowed but prices remain above relative moving averages.”