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Doctor Copper Moved to a New Floor Last Week

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Doctor Copper

While commodities generally follow the underlying demand-supply dynamics in the long term, according to some observers, copper prices also tend to reflect macro developments. Copper has been dubbed as “doctor copper” because many analysts see copper prices as a reflection of the global economy.

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Last week’s developments

Last week copper prices broke free of yet another psychological price level. The red metal, which fell below $4,500 per metric ton in 1Q16, rose past $7,000 per metric ton level last week. Although copper failed to hold the price level and fell below $7,000 during the week, it managed to close above $7,000 per metric ton in the week ending October 20.

There was a flurry of Chinese economic data last week. Over the weekend, China’s inflation data was released. The country’s producer price inflation rose 6.9% in September, beating consensus estimates by a decent margin. Earlier this month, Chinese copper imports data had lifted market sentiments.

Chinese economic data

China’s real estate investment and fixed asset investment data were released on October 19. While China’s real estate investment is still running strong, its fixed asset investment was lower than expected. It’s worth noting that the real estate and fixed asset investment sectors are among the key copper end consumers. Meanwhile, despite the slowdown in fixed asset investment growth rates, China’s 3Q17 GDP rose at a faster-than-expected pace.

Copper has been setting new price floors over the last few quarters. Last week, Cochilco, the Chilean State Copper Commission, raised its 2018 average copper price forecast to $2.95 per pound, which is significantly higher than its previous estimate of $2.68 per pound.

Southern Copper (SCCO) released its 3Q17 earnings on October 20. The company’s net income more than doubled in the quarter as compared to the corresponding period last year. Freeport-McMoRan (FCX), First Quantum Minerals (FM), and Teck Resources (TECK) are expected to release their earnings this week. In the next article, we’ll see what analysts are projecting for copper miners’ (BHP) 3Q17 earnings.

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