Copper Rallies to Three-Year High as China Plant Halts Aid Bulls
Comment of the Day

December 27 2017

Commentary by Eoin Treacy

Copper Rallies to Three-Year High as China Plant Halts Aid Bulls

This article by Bloomberg News may be of interest to subscribers. Here is a section:

Copper’s latest leg up follows news that Jiangxi Copper Co., China’s largest producer, had been ordered to stop output for at least a week before a further assessment based on local pollution levels. Earlier in the month, the No. 2 smelter, Tongling Nonferrous Metals Group, was asked to make similar cuts.

Jiangxi Copper gained 3.4 percent in Hong Kong and Tongling Nonferrous added 0.7 percent in Shenzhen to the highest close since Nov. 9.

“Copper stocks are rising as investors are bullish on copper prices amid an improving demand outlook from the U.S. and Europe in particular,” Yang Kunhe, an analyst with Pacific Securities Ltd., said by phone from Beijing. “The production cuts are temporary. A one-week halt won’t cause too big a problem for Jiangxi Copper. Smelters can also adjust by moving forward their annual maintenance.”

This quarter, Codelco said the company’s projections showed a sustained increase in deficits and “we don’t have any reason -- that we know of -- for closing them in the future.” The International Copper Study Group said the global deficit was 181,000 tons in the first nine months of 2017.

Eoin Treacy's view

We are almost two full years into a recovery in metal prices which is being fueled on the demand side by a return to synchronized global economic expansion and on the supply side by a reluctance to invest following what was a major bust between the 2011 and early 2016. That is contributing to the relative strength of the mining sector not least since it is still trading at a discount to the wider market on a valuations basis.


The quiet time around the holidays often gives us a clue to how trends will evolve at the beginning of the year and with both copper and oil breaking out to new recovery highs the outlook is looking positive for continued recovery by the resources and energy sectors.

That is contributing to a tailwind for the FTSE-100 which hit a new all-time again today as it completes what was an almost yearlong range.



BHP Billiton, Rio Tinto and Anglo American all moved to new recovery highs today.

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