The reddish metal is sensitive to worldwide and domestic news and developments due to its myriad uses in construction, manufacturing and additional industry. The metal’s movement is especially prone to happenings in China, which is the globe’s largest user of the base metal.
Accounting for an estimated 40 percent of copper usage, the Asian nation is immersed in a probe regarding inventories. Concerns are spreading about large amounts of the industrial metal, which will also drag its value down even further. The investigation centers on northeast port Qingdao and concerns use of copper as collateral when it comes to hammering out deals.
“Many of these extreme scenarios are not our base case, although we acknowledge that the issues in Qingdao could continue to cause short-term distortions and may ultimately limit liquidity available for financing deals,” states a Thursday note authored by commodity analysts with Bank of America Merrill Lynch, according to CNBC.
Investment houses chime in
Amid the tumult with the industrial metal and within the industry, investment houses have manifested notable responses to prospects for its performance.
On a long-term basis, Deutsche Bank said increased control of the metal will prove to be beneficial to the metals market. Societe Generale economists and analysts are not terribly concerned about the Chinese investigation. They shifted their attention toward the west.
After India elected a new prime minister last month, the reddish metal just might see a price surge as it could fall into increased demand. A new administration ready to administer rulership in the emerging economy.
The new leadership in the subcontinent is tasked with spurring development and growth, for which the industrial metal is poised to take a central role.
Exports from China
Prices of copper futures are also poised to be impacted by speculation about stronger supplies finding their way out of China.
According to Reuters, June figures will be the highest, checking in at 110,000 tons of copper shipped internationally. Next month those figures are slated to drop to 90,000 tons. And between both August and September, the total amount of the reddish metal finding its way out of China to worldwide locales is 90,000 tons.
Those sites include 700 facilities for storage among 38 worldwide locations, reaching from Detroit to Singapore and many sites in between.
Supplies provide baring
Supplies of the reddish metal also are likely to play a role in the market performance during the near term.
Bloomberg reports the London Metal Exchange said stockpiles fell by 55 percent this year to amount to 165,725 tons. That marks the lowest rate since August 2008.
Duration of Chinese probe to impact market
The ongoing tumult in China might be short-lived or it could last and persist in longevity. For that reason, The Wall Street Journal reports the investigation might represent merely the beginning of what might end up being a deeper, more extensive probe.
Analysts and investors should remain watchful of the financial system in the Asian nation, which has been going through a slowdown as of late. Copper plays such an integral role in Chinese society to the extent that any slippage now is likely to be made up in the future.
The Chinese and other industrious nations use copper for electrical supplies and the production of cars and other automobiles. Supplies of the reddish metal presently are strong, which avails the market to a modicum of flexibility when pondering the metal’s movement and market prices while the investigation in China unearths various directions that officials may probe.
This material is conveyed as a solicitation for entering into a derivatives transaction.
This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.
Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.
Trade recommendations and profit/loss calculations may not include commissions and fees. Please consult your broker for details based on your trading arrangement and commission setup.
You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.