Copper prices have been weak this year after rising for two consecutive years. Over the last few years, Chinese demand has been the key driver for copper prices. However, now China’s demand growth rates seem to have stabilized. Chinese copper imports, which are considered an indicator of the country’s copper demand, are up year-over-year in the first two months of 2018. In this article, we’ll look at the themes that copper investors should watch out for this year.
Several labor contracts at leading copper mines like BHP Billiton’s (BHP) Escondida are coming up for negotiation this year. Last year, we saw labor-related issues at copper mines owned by miners including Freeport-McMoRan (FCX), Teck Resources (TECK), and Southern Copper (SCCO). While some of the contracts were signed without difficulty earlier this year, according to Mining.com, workers at Antofagasta’s (ANTO) Los Pelambres copper mine in Chile have voted for a strike, “rejecting the company’s latest offer for a collective labor agreement.” Copper bulls are betting on supply-side disruptions to support copper prices this year.
Trade war fears
Meanwhile, copper bears might also fancy their chances as fears of a global trade war take center stage. Copper came under selling pressure after the United States Department of Commerce released its Section 232 findings in mid-February. While other factors also seem to be at play in copper’s price action, the risk of a global trade war seems to be weighing heavily on investors’ minds. Market sentiment can impact copper’s short-term price movements.
In the next article, we’ll look at the different scenarios for Freeport’s Indonesia operations.