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Copper reached USD 7,000 as Industrial Metals Rebound

Metal News - Published on Fri, 01 Dec 2017

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Market Realist reported that last week was broadly positive for industrial metals . Copper rose 3.6%, while aluminum prices rose 1.3% in the week ending November 24. Zinc and nickel rose 2.2% and 4.7%, respectively, last week. In the week ending November 17, most industrial metals saw negative price action.

In the week ending November 17, copper and zinc closed with losses of 1.0% and 2.7%, respectively, on the LME (London Metals Exchange). Aluminum was a relative outperformer that week. It closed with losses of 0.62%. Nickel was one of the worst performers with losses of 6.6%.

Last week’s upwards price action is a welcome break for industrial metals after two consecutive weeks of losses. Copper is trading near the USD 7,000 per metric tonne price level on the LME.

Metals and mining stocks also moved to higher price levels last week and followed commodities higher. Glencore (GLEN-L) rose 2.5%, Southern Copper rose 2.7%, and Antofagasta (ANTO) rose 2.8% last week. Freeport-McMoRan (FCX) was the best-performing copper miner in our select group of copper stocks with gains of 3.5% in the week ending November 24.

In this series, we’ll look at the macro developments that impacted mining companies in the week ending November 24. We’ll also look at some of the company-specific developments that impacted mining stocks during the week.

Last week, the ICSG (International Copper Study Group) released its August copper market commentary. In this part, we’ll take a deeper look at the report and discuss its implications for copper miners like Glencore (GLEN-L) and First Quantum Minerals.

According to the ICSG, global mined copper production fell 2.2% YoY (year-over-year) in the first eight months of the year. Lower mined copper production was mainly led by a 5% fall in Chilean copper production. We saw a labor problem at BHP Billiton’s (BHP) Escondida mine in 1Q17 that negatively impacted the global copper supply. The mine, which is situated in Chile, is the world’s largest copper mine. ICSG also listed lower production in Indonesia as a driver of the lower copper supply. The Indonesian government changed its mining laws earlier this year. Freeport-McMoRan’s (FCX) Grasberg operations were impacted negatively. It was barred from exporting concentrates from Indonesia for almost three months after the new rules.

According to the ICSG, the global apparent demand didn’t change in the first eight months of 2017 compared to the same period last year. Apparent demand is the real demand plus changes in inventory. According to the ICSG’s latest monthly press release, “Preliminary data indicates that world ex-China usage might have increased by about 1%.” However, China’s apparent usage fell 1%.

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Posted By : Rabi Wangkhem on Fri, 01 Dec 2017
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