Commodity Blog

Commodity Prices – Copper

Commodities continued to decline as Europe is still a source of uncertainty and risk aversion. Greece is unable to form a government, leading to speculation that the country may leave the eurozone. Such outcome can potentially threaten the integrity of the euro-area. The problems in Europe affect commodities negatively as the European Union is one of the world’s largest importers of raw materials. Additionally, Europe’s woes make the dollar stronger, putting additional pressure on commodity prices.

The Standard & Poor’s GSCI Spot Index of raw materials slipped 0.1 percent today. The MSCI All-Country World Index of shares reached the lowest level since January.

Gold slumped from $1,693.70 to $1,593.70 per ounce today on COMEX as of 23:48 GMT and the intraday low of $1,591.40 was the lowest since January 3. Copper went down from $3.6940 to $3.6715 per pound today. Futures for delivery rubber in October declined as much as 4 percent to $3,662 per metric ton on the Tokyo Commodity Exchange.

Copper fell today as attractiveness of industrial metals declined on negative macroeconomic data from Europe and the United States. The bad fundamentals erased yesterday’s positive mood and drove most commodities down.

The eurozone manufacturing Purchasing Managers’ Index slipped from 47.7 in March to 45.9 in April, the lowest level in 34 months. German unemployment increased by 19,000 jobs. That was an unpleasant surprise as analysts predicted a small decrease.

While traders get used to bad news from Europe, the USA usually was a source of optimism. It was not so today. Factory orders declined by 1.5 percent. Employment rose by 119,000 — not a bad figure if one forgets that forecasters promised an increase by 178,000.

All in all, today was a bad day for commodities. Nonfarm payrolls will on be released on Friday and should have a great impact on markets, confirming today’s employment report or proving it wrong. An interesting thing is that poor employment may be not a totally bad for riskier assets. The Federal Reserve may consider a next round of easing if the employment situation will become bad enough. Quantitative easing means a weaker dollar and higher prices for commodities as a result.

Copper price was down from $3.8300 to $3.7855 per pound as of 18:37 GMT on COMEX today, while daily low was $3.7655.

Copper is posting its first bullish week in a month as the traders decided to turn to the long side following reports on decreased production and betting on faster economic recovery.

Although the IMF has previously increased its global growth outlook for the next year, the forecasts for the industrial production rate were less positive, adding pressure on metals, including copper. Meanwhile, the copper producing and trading companies fail to report significant decline of demand in China.

Additional positive factor comes from the mines’ output drop reported by Rio Tinto Group, one of the biggest market participants. The shortage of copper lasts for 2 years already, with demand surpassing supply, and is likely to last for another year as the stimulus money is going to boost the supply.

Copper futures for April delivery went up from $3.6410 to $3.7050 per pound as of 15:49 GMT on COMEX today. Last week it went down from $3.7810 to $3.6205 per pound.

Many commodities fell today as the hedge funds and other big speculators continued cutting long positions on the industrial and main agricultural commodities, expecting China to grow slower than was expected back in 2011. Copper and platinum turned out to be the main losers on worsened expectations, while oil even hit its 2-month low today.

Copper is very dependent on the pace of growth of the Chinese economy. The country consumes about 40 percent of the world’s production and even slightest drop in growth would mean a significant drawdown in copper demand. The metal is already down about 5.3 percent this month.

Platinum once again trades below gold’s price despite the fact that it’s a rarer material. Being an industrial metal with a heavy reliance on the automotive sector, it reacts with a great volatility to any signs of poor performance from China, which is the world’s biggest car producer according to the latest available data.

Oil is a connected story. Having failed to advance past the major resistance level at $127/barrel in late March, this energy commodity is going straight down with a new minimum since February 15 touched today. As the forecasts for China’s GDP growth are revised down both domestically and internationally, the speculative demand for oil is vanishing quickly.

Copper opened $3.5885/pound today after closing at $3.6205 yesterday on COMEX. Today it is up to 3.6220 as of 16:49 GMT. Platinum is down from $1,579.50/ounce to $1,573.00 today, while oil (Brent) is currently down $121.41 to $118.59 per one barrel.

Copper fell for the straight day today, reaching the lowest level since January. Yield for Spain’s bonds increased, causing concern that the debt crisis is spreading across the eurozone. China reduced its imports of raw materials, adding to signs of waning demand. Copper price was down from $3.6370 to $3.6290 per pound as of 22:28 GMT today on COMEX.

Wheat rose today on the forecast that cold weather in the United State will slow growth of crops. Many analysts believe that the prices may yet fall in the near future as the market is oversupplied. The International Grains Council predicted that global stockpiles will increase 7.1 percent to 210 million metric tons this year, while output will reach 681 million tons in 2013 — the level seen only twice in history. Wheat spot price rose from $6.2625 to $6.2800 per bushel on CBoT today. Yesterday, the price sank from $6.4175 to $6.2500 per bushel.

Copper fell today for the third day, but that hasn’t deterred experts from being bullish on the industrial metal. The reason for this is the positive outlook for the US economy, caused by improving employment. Jobless claims fell from 363,000 to 357,000 last week, according to today’s report. Tomorrow, non-farm payrolls are expected to confirm that employment is rising steadily. Copper price was down from $3.8030 to 3.7915 per pound as of 18:52 GMT today on COMEX.

Soybeans continued to rally to a new record today on the forecast that adverse weather conditions will hurt crops in South America. Brazil may harvest 66 million metric tons, lower that the 68.5 million forecast by the US Department of Agriculture. Demand for US crops should rise with the shortage of supply from South American countries. The United States are the biggest producer of soybeans in the world, while Brazil is the second largest. Soybeans advanced from $14.2000 to $14.3225 per bushel today on CBoT, while the intraday high of $14.3425 was the same as the high on April 3, which was the highest price since September 5.

Commodities climbed today after Federal Reserve Chairman Ben Bernanke supported the case for accommodative policy. He explained that the unemployment level in the United States remained above the norm and policy makers should continue stimulating economy. Some analysts were surprised by the reaction of market participants as Bernanke didn’t say anything new. Nevertheless, markets reacted strongly and positively to the Chairman’s comments.

Earlier, raw materials were under a downside pressure on fears that the debt crisis may threaten Europe again. The concerns subsided as Germany signaled that it may support the idea of running both the temporary and the permanent bailout funds simultaneously.

May futures for delivery of crude oil rebounded to $107.03 per barrel on NYMEX after falling to $106.19. Brent crude climbed from $125.04 to $125.70 per barrel as of 21:47 GMT on ICE today. Gold went higher from $1,663.00 to $1,690.90 per ounce on COMEX today and touched $1,693.40 — the highest settlement since March 13. Copper climbed from $3.8250 to $3.8985 per pound in New York.

Metals rose today, but ended week with losses anyway on the signs of economic slowdown across the world. Gold ended this week flat.

Yesterday, traders have seen evidenced of problems in Europe and China. Today, even the United States made market participants worried. New home sales fell from 318,000 in January to 313,000 in February, even though they were expected to rise to 326,000.

Gold advanced from $1,644.10 to close at $1,661.10 per ounce today on COMEX. Silver went up from $31.50 to $32.25 per ounce today in New York. Platinum closed at $1,626.50 per ounce, following the advance from $1,619.90 to $1,637.90. Copper was higher from $3.7990 to $3.8165 per pound today.

Metals slid today on signs of worsening economy in China and the eurozone. China’s Purchasing Managers’ Index fell from 49.6 in February to 48.1 in March. The eurozone manufacturing PMI slipped from 49.0 to 47.7 this month, while the services PMI was down from 48.8 to 48.7.

Positive fundamentals in the United States contrasted with the negative data from Europe and Asia, allowing the dollar to strengthen. The strong greenback pushed commodities, including metals, to the downside. The Standard & Poor’s GSCI Index of commodities declined as much as 1.6 percent.

Gold was down from $1,649.90 to $1,643.00 per ounce as of 20:11 GMT on COMEX today, following the earlier drop to $1,627.50 — the lowest level since January 10. Silver price went down from $32.30 to $31.32 per ounce in New York today. Copper fell from $3.8350 to $3.7765 per pound today.

Copper dropped on signs that economic growth in China is moderating. BHP Billiton said that steel production in China is slowing, adding to evidence of economic slowdown in the Asian country. China is the second biggest economy and the major consumer of copper in the world.

Analysts in China say that the country will maintain demand, but the surplus of supply is what putting prices in trouble. Copper stockpiles jumped to 530,000 tons last week in Shanghai.

Copper price fell from 3.8865 to 3.8365 per pound yesterday on COMEX, while the intraday low was 3.8120.