As we noted previously, copper prices have been strong this year. Among other factors, the recent decline in the LME (London Metal Exchange) copper inventory has been cited as a bullish driver for copper. There has been a steep decline in the LME and SHFE (Shanghai Futures Exchange) copper inventory in the last few days.
Notably, the copper inventory has been a key price driver in the last few quarters. In the past, rising copper inventories boosted bears and we saw copper prices fall. However, bulls seem to have won the game this time when it comes to the copper inventory (GLNCY) (SCCO).
We should remember that short-term fluctuations in inventories don’t necessarily say much about the copper market balance. Fluctuations could also be due to copper’s movement from the official to the unofficial ecosystem.
While copper’s long-term fundamentals remain solid, the steep and sudden increase in prices concerns some analysts. Will copper prices (VALE) (XME) crash? Right now, the copper market’s sentiments are strong. Since the rally seems partially built on sentimental factors, we could see a reversal in copper prices.
According to Reuters, citing Carsten Menke, a commodity analyst at Julius Baer, “One trigger could be a rebound in the dollar and the other would be a confirmation that economic growth in top metals consumer China was due to slow down in coming months.”
Any increase in geopolitical tension could be another trigger for a downward correction in copper prices.
In the next part, we’ll see how analysts rate Freeport-McMoRan (FCX).