Copper Prices Hold Steady Amid Commodity Carnage

Previously, we discussed the dynamics of copper’s supply and demand. In this article, we will look at the latest trends in copper prices. Copper prices directly impact the profits of copper producers like Freeport-McMoRan (FCX), Southern Copper (SCCO), Teck Resources (TCK), and Glencore Plc. (GLNCY). Freeport currently forms 3.11% of the Materials Select Sector SPDR ETF (XLB).

The above chart shows the movement in spot copper prices. Prices have dropped ~6% so far in 2015, and prices of all industrial commodities have dropped in 2015. Iron ore prices are down ~12% in 2015, while aluminum has dropped more than 6%. Prices of steel products have also come down. Spot hot rolled coil prices are down by ~20% in the US markets.

Copper prices fell steeply at the beginning of 2015, although prices have recovered smartly since then. This is partially due to supply disturbances at some key copper mines.

The trend in copper prices has been clearly uneven this year. Higher copper prices benefit copper producers like Freeport-McMoRan. Investors should watch copper prices closely in the coming months to understand which way copper prices are heading.

Copper prices reached their peak in 2011 and have fallen more than 40% since then. This is mainly driven by the weakness in the Chinese economy. China accounts for more than 42% of global copper consumption. Investors need to track the indicators of the Chinese economy to understand the trends for copper prices.

In the next article, we will analyze the key indicators of the Chinese copper industry.