Copper market outlook - Upside momentum strikes out
This article is an extract of the monthly Commodity Briefing Service for Copper which examines copper market trends over the past month.
Julia Tilley | 14 April 2017
LME cash copper prices averaged US$5,838/tonne over the first quarter of 2017, just 1.5% above our forecast of US$5,752/tonne. We believe that investor sentiment was one of the main supportive factors. CFTC net longs were relatively high for much of the quarter, as were LME commitments of traders reports. The high level at which exchange stocks ended the quarter, however, suggests some fundamental weakness, and the recent decline in net longs could indicate this is feeding through to the investment community.
Furthermore, several supply shocks have supported prices. One of the most obvious sentiment boosts was the 43-day Escondida strike (we had initially anticipated it would be closer to 25 days) resulting in an estimated 220,000 tonnes lost production, although this could turn out to be higher. Cessation of production at Grasberg, and a 50% reduction in production at Cerro Verde during an 18-day strike added to this. However, the strikes haven't yet fed through to the refined market, where supply has been boosted by an influx of scrap, reflected in widening discounts.