Base metals have been strong for most of 2017. While copper rose past $7,000 per metric ton on the LME (London Metals Exchange), aluminum prices flirted with $2,200 per metric ton. Not long ago, metal prices seemed swamped in a long-term bear market. Copper prices fell below $4,500 per metric ton in 1Q16, while aluminum tested $1,500 per metric ton. Not many analysts expected these metals to even trade near the price levels that we have seen this year.
After a weak November, where aluminum shed almost 5.0% and copper lost ~0.3%, we’ve seen a fresh wave of selling in industrial metals this month, especially in zinc and copper. Based on the closing prices on December 7, copper and aluminum have lost 3.3% and 1.9%, respectively, in the month. So far, zinc prices have fallen 2.4% in 2017. Despite the recent sell-off, most industrial metals are trading with yearly gains—building on last year’s gains.
Looking at mining stocks, Freeport-McMoRan (FCX) and Southern Copper (SCCO) have risen 6.6% and 0.5%, respectively, in December. So far, Glencore (GLEN-L) has lost 0.6% in December, while Teck Resources (TECK), the diversified Canadian miner (EWC), has seen its stock price fall 1.2%.
In this series, we’ll see why industrial metals like copper and aluminum have come under selling pressure after a remarkably strong year.
We’ll start by analyzing why copper prices have been weak in December.