Copper Attempts To Rally - Southern Copper Shares Follow The Red Metal

Summary

• A move to the highest price since May.
• Copper inventories have increased.
• Trade remains a bearish factor.
• The dollar and U.S. rates are supportive.
• SCCO is a mining company that is a proxy for the red metal.
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Many market participants look to the copper market as a barometer of the overall health and wellbeing of the global economy. The red metal is an essential building block for infrastructure. The nickname, Doctor Copper, comes from those who believe that the base metal has a Ph.D. in international economics. Before 2005, the price of copper had not traded above $1.6065 on the nearby COMEX copper futures contract. However, double-digit economic growth in China took the price of the base metal to a high at $4.6495 per pound in 2011, and the price has not traded below the $1.6065 level since 2009, in a decade.

Copper is a metal that is highly sensitive to economic growth or contraction around the world. These days, the metal is watching the trade dispute between the United States and China. Chinese demand for copper is a function of the world's most populous nation's growth. The most recent GDP data from China was at a record low of 6.2%. Trade issues have weighed on Chinese economic growth. However, we must remember that nominal growth at 6.2% on the current level of GDP is higher than it was when the world's second-wealthiest nation was growing at a double-digit pace.

So far in 2019, the price of copper on the COMEX futures market has traded in a range from $2.5995 to $2.9955 per pound. At $2.7125 on July 24, the red metal was below the middle of its trading band for the year because of concerns over the ongoing trade dispute and its impact on China's economy. Over recent weeks, the price of copper has made higher highs, and the metal briefly probed above the midpoint price for this year. Shares of Southern Copper Corporation (NYSE:SCCO) move higher and lower with the price of the metal.

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Analyst’s Disclosure:I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

The author always has positions in commodities markets in futures, options, ETF/ETN products, and commodity equities. These long and short positions tend to change on an intraday basis.