Copper Price Index Up, But Still In A Bear Market

Includes: CPER, CUPM, JJC
by: MetalMiner

By Raul de Frutos

The monthly Copper MMI® registered a value of 86 in June, an increase of 1.2 percent from 85 in May. The three-month copper price on the LME closed the month of May at $6,905 per ton, not a big move from last month.

Are LME copper inventories dropping to new low levels? Some say it’s true. What price assumptions can we make based on that? Zero. Copper is still digesting a 4-year low experienced in March, causing prices to modestly rise during the past two months.

3M LME Copper price since 2013

The picture still looks bearish for copper:

First, the US dollar doesn’t seem willing to turn down and that doesn’t help to push copper up. Second, although commodities showed some life at the start of the year, the rise stopped during the last three months. Commodities need to show further strength if we want to see a healthy environment for copper to turn up. Finally, the metal sector keeps being the worst performer among commodities (with the exception of nickel), and that is not good for copper, either.

Commodities index trending flat (in orange). Industrial Metals index underperforming (in grey)

We don’t see anything indicating immediate price risk, just like six months or two years ago. Trying to pick up bottoms is a bad strategy for metal buyers. We recommend buyers keep riding the trend and don’t take long-term positions until we see real price strength.

What This Means For Metal Buyers

Copper remains in a falling market and unless prices break above $7,500 per ton, price moves should be considered as nothing more than normal fluctuations within an overall downtrend. We wouldn’t suggest taking long-term positions as we might see copper recording new lows through the rest of the year.

The primary copper cash price rose 4.0 percent on the LME to $6,995 per metric ton after falling the previous month. Finishing at $3.83 per pound, the price of US copper producer grade 110 saw a 3.0 percent shift lower for the month. On the LME, the 3-month price of copper rose a slight 2.9 percent over the past month to $6,905 per metric ton. The price of US copper producer grade 102 increased 2.8 percent to $4.02 per pound. The cash price of primary Japanese copper rose 2.8 percent to settle at $7,244 per metric ton.

With a 0.2 percent decline, the Chinese copper cash price closed the month at $8,122 per metric ton.

The price of Korean copper strip held steady around $9.44 per kilogram last month. Chinese bright copper scrap held pat last month at $7,087 per metric ton. Hovering around $7,958 per metric ton for the month, Chinese copper wire remained unchanged.