The Dow Jones-UBS Copper Subindex Total ReturnService Mark is a sub-index of the Dow Jones-UBS Commodity Index Total ReturnService Mark and reflects the returns that are potentially available through an unleveraged investment in the futures contracts on physical commodities comprising the index plus the rate of interest that could be earned on cash collateral invested in specified Treasury Bills. The index includes the contract in the Dow Jones-UBS Commodity Index Total ReturnService Mark that relates to a single commodity, copper (currently the Copper High Grade futures contract traded on the COMEX).
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However, although Tsunami warnings were issued on the coast, they have now been cancelled, and there were no initial reports of casualties or serious damage from the second quake.
Glencore Xstrata's (GLCNF, GLNCY) and Anglo American's (AAUKF, AAUKY) Collahausi mine said it is continuing the "process of normalization" without problems following an evacuation of workers because of Tuesday's quake.
Teck Resources (TCK) and Southern Copper (SCCO) also have mining operations in Chile; the latter's were continuing normally following the first quake.
Metals continue to lead the way down in commodities following the FOMC results and Yellen press conference. Unless something happens to change the Fed's mind, QE will end this fall and rate hikes are starting about one year from today.
Gold -1.4% to $1,322 per ounce - as recently as Monday, the metal was challenging $1,400. Silver -2.6% to $20.28. Copper -2.2% to $2.92 per pound. Platinum -1% to $1,437 per ounce. Palladium -2.1% to $752. WTI crude oil slips another 0.4% to $98.76.
Gold's retreat over the last couple of sessions has wiped out all of March's gain.
China's copper consumption will grow for more than a decade as demand from the world's top user of the metal remains robust despite fears of an economic slowdown, a top executive at Freeport McMoRan (FCX) says.
Worries over slower growth in China, which accounts for 40% of global copper consumption, helped send prices to a 44-month low last week, down 12% YTD.
China's import volumes should remain brisk even if its GDP expansion slows to 3%-4%, while a recovery in the U.S. and European economies also should support copper consumption, FCX believes.
"The creaks and groans in the copper price reflect the sound of the tunnel supports giving way," writes SocGen professional bear Al Edwards. "Decoupling" is the "most dangerous word in finance," he says, and slumping metals prices isn't just about some temporary local issues in China. "Do not rely on decoupling. Do not rely on central bank liquidity. Do not reply on hope. Hope is a false friend in these markets."
The price of copper has slid to about a 4-year low this week (though it's up 1% this morning), amid China's slowing economy and fears of a for-the-books credit bust-up.
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.
Very little "China upside" has been priced in, says Goldman analyst Noah Weisberger, noting Asian-focused funds are "significantly underweight" China. His team is forecasting a big 19% gain in Chinese equities traded in Hong Kong next year.
Goldman is pairing its long-China call with a short on copper (JJC) due to "abundant supply and a lack of accelerating demand."
The long/short idea is #4 in Goldman's list of top trade ideas for 2014. Previous ideas are here.
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.