Copper Price Outlook for 2014: Less 'Caterpillar', More 'Comex'

Includes: CAT, CU
by: MetalMiner

By Taras Berezowsky

(Click to enlarge)

The monthly Copper MMI® rose 1.1%, up to 91, for October, based on higher Chinese wire, scrap and cash prices and upticks on the LME.

So what were the primary drivers of the increase?

“Copper is reacting to macroeconomic factors such as the Federal Reserve’s decisions on quantitative easing (QE),” said Stuart Burns, co-founder and contributing editor of MetalMiner. “Copper price movements have been investor-driven, rather than by fundamentals.” In essence, speculators have had more impact on the market than actual supply and demand.

Copper Market Outlook

Based on MetalMiner data and how the markets are shaping up, the outlook for the copper sector appears to be rather uncertain.

“Demand is opaque because a considerable amount of material is flowing into and out of inventory, much of which is not readily visible,” Burns said. “Supply, however, is increasing and the trend is likely to be down in Q4.”

Case in point: just recently, Chile’s government reported that 492,883 metric tons of copper were produced in August, a 7.6 percent increase from a year earlier, as production recovered at the Collahuasi mine and new projects came on-line.

Cat to Benefit from Copper Mining?

One big U.S. manufacturing OEM benefiting from increased copper supply coming online is Caterpillar Inc. (NYSE:CAT).

Miners are extracting copper, for one, from “ever-deeper mines because the easy-to-reach veins have already been worked out,” according to a recent report. The Herald Review quotes Caterpillar’s group president in charge of resource industries, Steve Wunning, as saying,“What drives the demand for our equipment is not so much how much copper is produced … but how much material is removed (to reach it)…so I think on all accounts … the long-term future of mining is very attractive and very exciting.”

Time will tell.

Key Price Drivers of the Copper Index

Chinese bright copper scrap prices rose 2.3 percent after rising the previous month. After rising the previous month, Chinese primary cash copper prices rose 0.3 percent. Chinese copper wire prices rose 0.3 percent after rising the previous month as well.

Korean copper strip rose 3.6 percent.

The price of U.S. copper producer grade 110 rose 2 percent over the past month. The price of U.S. copper producer grade 102 rose 1.9 percent over the past month, the second straight month of gains.

The copper 3-month price closed the month up 0.3 percent on the LME at $7,295 per metric ton. The cash price of primary Japanese copper finished the month 2 percent higher.

The Copper MMI® collects and weights 12 global copper metal price points to provide a unique view into copper price trends over a 30-day period. For more information on the Copper MMI®, how it’s calculated or how your company can use the index, please drop us a note at: info (at) agmetalminer (dot) com.