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Mid-Year Review: What Could Drive Copper Miners in 2H17

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Jun. 16 2017, Updated 7:36 a.m. ET

Copper miners and key drivers

Copper’s story has essentially been a supply-side-driven deficit. We’ve seen significant supply disruptions this year, and the copper supply chain has come back into focus again with the heavy rains in Chile (ECH), the world’s biggest copper miner.

We also have an ongoing impasse at Freeport-McMoRan’s (FCX) Grasberg mine. The mine, where Rio Tinto (RIO) is the minority partner, is facing labor unrest, and now, Freeport is negotiating long-term mining rights with the Indonesian government.

Investors in copper mining companies like Southern Copper (SCCO) and Teck Resources (TECK) will watch copper’s supply dynamics closely in coming months, as these could impact copper prices.

On the demand side, while copper demand was healthy in 1Q17, recent Chinese demand indicators have raised concerns over the country’s copper demand. Investors will be following Chinese demand indicators in coming months to get a better sense of the country’s true copper demand.

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Geopolitical issues, Trump, and the US dollar

Copper tends to react to geopolitical developments. There are several ongoing geopolitical developments across the globe that could impact copper.

President Donald Trump’s economic policies and the US dollar’s movement could also impact copper in the second half of the year. We should remember that copper tends to have a negative correlation with the dollar.

In the next part, we’ll examine Chinese copper demand indicators.

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