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Why Copper Bears Shouldn’t Lose Heart

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Nov. 20 2020, Updated 5:22 p.m. ET

Copper bears

Copper bears have been in for a rough ride this month. In this part, we’ll discuss the factors that have been supporting copper prices (GLEN-L). We’ll also see whether copper bears can stage a comeback in 4Q17.

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Supply-side fears

Recently, there have been some news flows regarding the copper supply. According to Bloomberg, Congo disallowed copper concentrate exports from Sicomines. However, it’s worth noting that the mine only exported 115,000 metric tons of copper concentrate, which is too small to move the needle for copper’s supply. China imports more than a million metric tons of copper concentrates every month.

There have also been concerns about copper’s supply being impacted negatively because of an earthquake in Chile (ILF), which is the largest copper miner. According to Metal Bulletin, Codelco and Antofagasta (ANTO) operate mines in that region. The two mines “reported no damage to their operations.”

Grasberg issues

There have also been concerns about Freeport-McMoRan’s (FCX) Grasberg operations (RIO). While Freeport is still negotiating key terms to extend its license in Indonesia, the possibility of an export ban looks quite dim based on public statements from Indonesian officials.

China plans to ban a particular scrap grade. Bulls see the ban as a bullish driver for copper prices. According to a Reuters article, even if China bans copper scrap imports, the scrap could still be processed outside the country or imported into China under a different product category.

While copper bears have been overshadowed by the bulls this month, they might like their chances in 4Q17. A key event to watch this month could be China’s Communist Party Congress. Read Should Copper Miners Follow China’s Communist Party Congress? to see how the event could impact global copper markets.

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