Based on current U.S. monetary policy moves, increased U.S. manufacturing demand, global supply factors – and not a small bit of BHP Billiton (BHP)-type bullishness – the monthly Copper MMI® increased 6.4 percent in October, registering a value of 100, up from 94 in September.
“Though it appears as though the copper price index took a big jump this past month (it moved up by 6 points, the third-highest jump of our 9 monthly indexes), copper has only now reached its Jan. 1 baseline of 100,” said Lisa Reisman, managing editor of MetalMiner.
“All measures of copper prices within our monthly index – including prices from China, Japan, the U.S., Korea and India – all moved positively.”
Jan. 2012 baseline = 100. Source: MetalMiner IndX℠
Industrial demand in the U.S. as measured by the latest ISM data would not have provided the sole impetus for rising copper prices. Quantitative easing – or QE3 – announced mid-month undoubtedly provided an additional lift for copper. Supply remains tight at four days of global demand, further lending support to prices.
If what major producers such as BHP Billiton are saying are any indication, copper supply tightness will likely continue in the near term.
BHP Billiton and several other market analysts expect the current global copper output (which stands at about 15 million metric tons) to continue declining due to resource depletion and poorer copper ore grades.
“Throw in some resource nationalisation, environmental constraints and operating cost escalation, and it is clear there has to be some big-time investment in new mines and expansions of existing operations with the supporting reserve base,” reads a recent article in The Australian.
According to NASDAQ, BHP Billiton forecasts copper production to increase at an annual rate of 10 percent. The company continues to express confidence in future Chinese and Indian growth.
Price Drivers of the Copper Index Rise
The prices of U.S. copper producer grade 110 and 122 climbed 8 percent. The price of U.S. copper producer grade 102 closed the month after gaining 7.7 percent. Chinese bright copper #2 scrap prices finished the month up 7 percent. The price of Chinese copper wire jumped 6.8 percent last month, while the Chinese copper cash price rose 6.9 percent.
The price of Korean copper strip ticked up only slightly over the past month, by a few cents per kilogram. Last month was relatively consistent for the Japanese copper cash price, but it still increased 0.7 percent.