The iPath® Pure Beta Copper ETN is linked to the Barclays Capital Copper Pure Beta TR Index (the "Index"). The Index is intended to reflect the returns that are potentially available through an unleveraged investment in the futures contracts in the Copper markets.
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There's no real threat to copper mining operations at a long-term copper price ~$3/lb., White says, but that could change if the price drops below $2.50 for a prolonged period.
Iron ore prices have performed better than expected in recent years, and this week’s drop brings them closer to many forecasts; analysts believe most iron ore projects are fine at a long-term price above $100/metric ton.
Coking coal's current $110/metric ton is still not low enough to disrupt most operations, with some exceptions; TD Securities expects Teck Resources (TCK) to defer its Quintette project in British Columbia until the market recovers.
A check of asset markets following what's currently being interpreted as a strong nonfarm payroll report (175K jobs added vs. 154K expected; UE rate up to 6.7%): Flat ahead of the number, stock index futures are up by 0.5%; gold is down 1.1%, silver down 3.2%, copper off 2.9%; the dollar is up a bit, but mostly against the loonie after a weak jobs number in Canada.
Copper's posting a middling gain of 0.4% in afternoon action, but it's enough to break a nine-session losing streak - the longest going back to December 1995. No mystery - the selloff came thanks to global growth worries brought on by a mini-meltdown in emerging markets and weak numbers in the States. Today's gain comes as equity markets stabilize.
At $3.20 per pound, the metal has fallen from about $3.40 at the start of the year, but remains within the $3-$3.40 range it's been in since April.
The WSJ shines a light onto "shadow warehouses," a hidden system of facilities that store tens of millions of tons of aluminum, copper, nickel and zinc across the globe for banks, hedge funds and commodity merchants.
The warehouses operate outside the London Metal Exchange's system, are unregulated, and don't provide details of their holdings. As a result, it's unclear how much metal is held in the shadow system. This lack of visibility could cause major price swings.
The WSJ article follows allegations that warehousing companies have artificially boosted the price of metals, particularly aluminum.
Companies that operate metals warehouses include Goldman Sachs (GS), Glencore Xstrata (GLCNF) and JPMorgan (JPM), although the latter is looking to sell its commodities unit.
China's top copper producer reportedly agreed with FCX to treatment and refining charges of $92/metric ton and $0.092/lb. for term copper concentrate shipments in 2014, setting the benchmark for the region, vs. $70/metric ton and $0.07/lb. charged by the smelters from Freeport this year.
BHP, whose opening offer of $80 and $0.08 offer to Chinese smelters last week now looks low, is meeting the smelters for a second round of talks this week.
Copper futures tumble to their lowest level in more than three months on concerns about the pace of Chinese economic growth; December futures fall more than $0.06 (-2%) to $3.17/lb., hitting their lowest level since late July.
Copper and other base metals are suffering from rumors that the China will lower its 2014 growth target to 7%, says Commerzbank commodities strategist Eugen Weinberg.
BHP Billiton (BHP) is betting strong returns from its copper business, even though copper prices are unlikely to rise in the near term, CEO Andrew Mackenzie says in an interview today.
The China shift to a consumer-led economy from a construction-led economy will reduce demand, but it might not be as bad as had been thought. "I don't like to comment on prices, but we have to prepare for a copper outlook around the current price, or perhaps a bit lower, that is around $3 per pound," he says.
China's GDP miss and disappointing industrial production data are sending global equity markets lower, as well as copper and oil, which is also suffering from the IEA slightly cutting its demand outlook last week. Japan -1.6%, Hong Kong -1.4%, China -1.1%, India +0.6%. EU Stoxx 50 -0.2%, London -1%, Paris -0.8%, Frankfurt -0.8%, Milan -0.2%, Madrid -0.4%. Oil -2.4%, copper -1.5%.
Analysts are slashing predictions of a copper glut as producers from Chile to Indonesia contend with aging mines and strikes at a time of record demand. The global surplus will total 18.5K metric tons, according to a Bloomberg survey, 85% less than a January forecast of 124K tons; the survey also says prices will rally as much as 14% to $8,700/ton by year's end.
Copper closed the week at a six-month low, as traders shed their initial positive reaction to China's rate cut to focus on the move as a sign of weak Chinese economic growth. Barclays says any boost in demand from Beijing’s pro-growth measures might not be felt until Q4, and the “magnitude of support... is not seen as being anywhere near the same scale as the stimulus of 2008-09."
Short-covering of copper by Chinese firms may actually be driving the world price lower as the country's largest producer is exporting the metal to LME warehouses to cover its shorts. The move makes sense as the sluggish economy has dragged the price of copper lower in China than at the LME.
U.S. Commodity Funds is cutting the management fee on its Copper Index Fund (CPER) by 31.5% to better compete against iPath's Pure Beta Copper ETN (CUPM). Both funds are tiny - less than $3M in assets (JJC is the gorilla in the sector) - but CPER is an ETF as opposed to the ETN structure of the other offerings.
After commodities hit nearly two-year lows last week, investors are wondering whether the decade-long rally is over. Various headwinds prevail, including a slowdown in China, a U.S. economy that has yet to regain its momentum, and temporary supply gluts for some raw materials.