How did copper prices play out in May?
Previously, we looked at some of the recent developments in the Chinese copper industry. With its mammoth copper consumption, China has been the key driver of copper prices in recent years. In this part of the series, we’ll see how copper prices played out in May.
Copper is among the most heavily traded metals on the LME (London Metal Exchange).
Copper pares some gains
The above chart shows the recent movement in copper prices. Spot copper prices lost 2.5% in May, while the three-month rolling future shed 2% over this period. The month started on a strong note for copper, and on May 12, it touched $6,445 in the spot market. This was the highest trading level for the red metal since December 2014.
However, copper has been on a losing streak since then and closed the month with a 2.5% loss. The rout has not been limited to copper, as other base metals also pared some of their April gains. Aluminum lost ~10% in May, marking its worst monthly performance in the last several years. Iron ore, which has lost more than 55% since the beginning of 2014, closed flat in May.
The negative impact
Lower copper prices negatively impact copper producers like Freeport-McMoRan (FCX), Southern Copper (SCCO), and Thompson Creek Metals (TC). Freeport, the second largest copper producer after Chilean government-owned Codelco, forms part of several leading ETFs. It currently forms 1.16% of the iShares North American Natural Resources ETF (IGE) and 4.1% of the Materials Select Sector SPDR ETF (XLB).
Along with copper prices, investors should track the movement in copper inventories. We’ll take a look at this in our next part.