Can Copper Prices Fall below $4,000 per Ton?
Freeport-McMoRan Nears 52-Week Lows on November 13, Commodities Crash
Copper prices
Copper prices resumed their downside in November after remaining relatively strong in October. On November 13, 2015, the LME (London Metals Exchange) three-month copper contract closed at $4,810 per metric ton, losing more than 1% from the previous day’s closing.
So far in November, the LME three-month copper contract has lost ~6% and joined the ranks of other metals, including steel and aluminum, to hit fresh 2015 lows. The graph below shows the recent movement in copper prices.
How low can it get?
Goldman Sachs had earlier given a target of $4,800 per ton for copper by the end of December 2015. However, according to an October 8 Reuters report citing Max Layton, the head of European commodities research for Goldman Sachs, copper could even fall below $4,000 per metric ton.
A November 12, 2015, Reuters’ article, cited Axel Rudolph, technical analyst at London-based Commerzbank, who noted, “Copper is likely to extend losses in coming weeks to $4,397.”
Bears are back
Bears, it seems, are back full throttle in copper. The bearish sentiments surrounding copper faded somewhat a few weeks ago on supply cuts from Freeport-McMoRan (FCX) and Glencore (GLNCY). However, the goodwill failed to last beyond a month, and copper prices have resumed their downside.
While FCX and GLNCY have announced production cutbacks, diversified miners such as Rio Tinto (RIO) and BHP Billiton (BHP) don’t plan to cut their copper production. Both companies are among the low-cost copper producers, so it would make economic sense for these companies to keep mining copper from their mines.
Meanwhile, the concern has again shifted to the demand side of the equation. In the last week or so, there has been quite a bit of negative data from China, whether it is monthly trade data or credit activity. Pessimistic Chinese data is weighing heavily on copper prices. A stronger US dollar (UUP), on expectations of a possible Federal rate hike in December, is not helping copper’s cause, either.
In the next part of this series, we’ll look at the recent trend in energy prices
Browse this series on Market Realist:
