US payrolls light fire under copper price

Blasting at the Kamoa-Kakula project in the Congo, which has the potential to become the world’s second largest copper mine when it goes into production late 2021. Photo by Ivanhoe Mines, 2019.

The price of copper surged on Friday after reports showed the US economy is in robust health on the back of strong payroll numbers – the best reading since January – and progress is being made in trade talks with China.

Trade worries have dogged copper price bulls for the better part of a year, and China is vital to overall demand for the metal widely used in the manufacturing, construction, transportation and electricity sectors.

In afternoon trading in New York, copper for delivery in March continued to climb – hitting $2.7535 a pound ($6,070 a tonne), up 3.4% on the day and the highest since July.

A panel of more than 30 analysts polled by FocusEconomics expects prices to stay above today’s level during the first quarter of next year and improve further by the end of next year

Copper was also buoyed by an improvement in large-scale investor sentiment, a note from Capital Economics on Thursday points out. The combined position on the LME and COMEX futures markets switched to a net long recently after hitting a record number of net shorts (bets that copper could be bought back at lower price in future) at the end of the third quarter.

Despite strong fundamentals – weakening mine supply, threat of disruptions – most notably from top producer Chile, low global stocks and robust demand outlook – spikes in the copper price this year have turned out to be temporary.

A panel of more than 30 analysts polled by FocusEconomics for its December study expects prices to stay above today’s level during the first quarter of next year and improve further by the end of next year.

The Barcelona-based independent research company points out that there is a wide spread between forecasters suggesting a large degree of uncertainty about the outlook. 

The highest forecast for the average price in Q4 2020 is $7,000 per tonne ($3.17/lb) from Goldman Sachs (+16.7% from current price), while five investment banks and research firms, including JP Morgan and Commerzbank, see copper falling back below $6,000 a tonne. The median forecast for Q4 2020 is $6,255.

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