One of the most attractive attributes of the global metal futures trade is diversity. From platinum to iron ore, a broad-spectrum of assets is available to trade, each with a unique market dynamic. Whether you are interested in hedging systemic risk or in active speculation, metal futures offer an avenue by which to pursue almost any financial goal.
Metal futures products are divided into three primary categories:
- Precious: Precious metals are naturally occurring elements that have economic value. They exhibit scarcity, utility, and frequently act as forms of currency. Gold, silver, and platinum are examples of precious metals.
- Base: A base metal is considered to be common and therefore not precious. Due to their physical properties and availability, base metals are used in an industrial capacity. Examples are copper, zinc, and aluminum.
- Ferrous: A ferrous metal is one that is comprised largely of iron. Highly corrosive and recyclable, ferrous metals are used in the manufacturing of tools, automobiles, and railroad tracks. Alloy steel and cast iron are well-known examples.
The CME Group offers an extensive collection of futures contracts facing these three classifications of metal. Although most traders and investors are aware of precious offerings such as gold and silver, a limited number actively engage the base or ferrous markets.
However, this is beginning to change. Featuring growing volumes, CME copper futures are gaining momentum and the attention of metals traders worldwide.
The full-sized copper futures contract from the CME is a premier venue for trading base metals. Averaging more than 100,000 traded contracts per day, institutional and retail traders alike regularly engage this budding market.
Here are the contract specifications:
|Contract Size||25,000 pounds|
|Price Quotation||U.S. cents per pound|
|Tick Size||$0.0005 per pound|
Along with gold and silver, copper is a top three metal product in terms of daily traded volume. Valuations are largely driven by global economic growth, disruptions to the supply chain, and regional geopolitical events. Cyclical industries such as construction play a major role in ongoing demand levels and are frequently referenced as relevant copper price news.
Copper Price News 2018
Last year proved to be a banner year for copper. As commercial lending and new construction reached multi-year highs, economic growth flourished around the globe. Copper reflected this phenomenon, with cash prices jumping from $5,512 MT on January 1, 2017, to $7,215 MT at year’s end, a gain of 30%.
The consensus view toward copper pricing is for 2018 to extend the gains of 2017. Estimates from Goldman Sachs project a 12% rally to $8000 MT, a level last seen in 2013.
Several pieces of copper price news are driving the bullish sentiment for 2018:
- Robust global economic growth led by the United States, European Union, and China are expected to foster a spike in industrial output.
- A supply deficit of 104,000 metric tons is forecasted. Disruptions in the supply chain stemming from mining labor disputes may play a key role in copper production levels. A 43-day strike in Chile’s Escondida mine derailed global outputs by 10% in 2017. With no long-term labor agreement in place, a 2018 strike is possible.
- As industrial production levels increase on an international scale, commodities such as copper, iron ore, and crude oil are expected to be in high demand. This dynamic is likely to place additional strain on limited supplies and promote a widespread rally in commodity values.
This year is projected to be a strong year for growth in both developed and emerging markets. Given an increase in global demand and a deficit in supply, copper is widely viewed as a safe bet to continue 2017’s bull run.
Getting Started in Copper
Figuring out which copper price news items are market drivers and which are not can be a complicated task. In order to approach copper futures from a position of strength, securing the services of an experienced industry professional is a must. A free consultation with a licensed commodities broker at Daniels Trading is a great first step in making copper futures work for you.