Asia Is Driving Copper Trading
Summary
- As the world's largest copper consumer and one of the largest producers, China's influence in global copper markets cannot go unnoticed.
- This has been, and continues to be, evident within COMEX Copper Futures trading activity.
- A recent surge in U.S. overnight trading activity may indicate the strength of this influence has only just begun.
By Jon Lynch
At a Glance
- While copper prices plummeted, market participation during Asia trading hours accelerated.
- Asia has become the leader in copper consumption, accounting for 70% of global refined copper usage.
It is no secret that China holds a major presence within the global copper supply chain. As the world's largest copper consumer and one of the largest producers, China's influence in global copper markets cannot go unnoticed. This has been, and continues to be, evident within COMEX Copper Futures trading activity. A recent surge in U.S. overnight trading activity may indicate the strength of this influence has only just begun.
Copper Prices and Industrial Production
Prior to the global economy slowing down due to COVID-19, there was evidence that the copper futures price was poised to break out of its six-month slumber and head back towards $3/lb.
Chinese industrial production in 2019 had consistently been higher than 2018 throughout the year. However, the start of 2020 was quite the opposite. January and February figures were reported as a combined -13.5% from a year earlier. This coincided with the onset of the COVID-19 pandemic, as well as a sharp decline in copper prices.
Chinese Industrial Production
Asia Time Zone Trading Activity
While copper prices plummeted, participation during the Asia time zone accelerated. Trading activity during the Asia time zone, defined as 8 a.m. to 8 p.m. in Singapore, increased 4% over the same time period in 2019 and rose 5% over Q4 2019. This also accounted for 34% of total average monthly copper futures traded in Q1 2020. This trend has continued through April and May, with 36% of copper futures transacted overnight.
Asia has become the leader in copper consumption, accounting for 70% of global refined copper usage in 2018.
Despite the global copper supply chain being disrupted due to the COVID-19 pandemic, trading activity during Asia trading hours remains strong. The return of higher copper prices may be difficult to predict, but the first signs of a trend could come during the U.S. overnight hours in futures markets.
Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.
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