{"id":1321,"date":"2020-12-10T12:43:40","date_gmt":"2020-12-10T12:43:40","guid":{"rendered":"https:\/\/campus.hesge.ch\/commodity-trading\/?p=1321"},"modified":"2020-12-10T12:43:40","modified_gmt":"2020-12-10T12:43:40","slug":"copper-bulletin-3","status":"publish","type":"post","link":"https:\/\/campus.hesge.ch\/commodity-trading\/copper-bulletin-3\/","title":{"rendered":"COPPER – Bulletin #3"},"content":{"rendered":"\n

Price movement – Historical price (November-December 2020)<\/span><\/strong><\/p>\n\n\n\n

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The Y-Axis represents the price of Copper per Metric Ton.<\/p>\n\n\n\n

Source: https:\/\/www.lme.com\/en-GB\/Metals\/Non-ferrous\/Copper#tabIndex=2<\/a> – consulted December 9th 2020<\/p>\n\n\n\n

Several factors can explain the increase of Copper\u2019s price over the last month. Starting with the increase in demand<\/strong> due to China\u2019s strong growth manufacture-wise as well as its increase in copper stored related to a possible new stockpiling policy by the Chinese Government. The increase in demand is also explained by the still-low level of US dollar\u2019s value and the global economic and manufacturing bounce back due to hope related to vaccines announcements from several countries.<\/p>\n\n\n\n

The decrease in supplied quantities <\/strong>due to sanitary reasons in south America and political tensions in Peru (2nd biggest mining country) which created tensions on the investing side. <\/p>\n\n\n\n

For economical reasons, the crossing between supply and demand in the above-mentioned situation implies an increase in price.<\/p>\n\n\n\n

Price movement- Forward Curve<\/span><\/strong><\/p>\n\n\n\n

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Data source: https:\/\/www.cmegroup.com\/trading\/metals\/base\/copper.html<\/a> – consulted December 9th 2020<\/p>\n\n\n\n

The graphic shows that the forward curve on the 09.12.2020 is different from the one on the 18.11.2020 and the one from 29.20.2020. The price of the forwards in the 09.12.2020 is higher than the ones before, we can therefore assume that the market is doing better than expected. <\/p>\n\n\n\n

The curve is relatively flat with a small contango. The small contango suggests that the supposition of the market today is that the supply over the year is going to be relatively good. Yet, the fact that it is almost flat suggests that the market is uncertain towards the evolution of Copper\u2019s price and that it can go up as it can go down more or less quickly. <\/p>\n\n\n\n

The uncertainty can be related to different aspects. The first one is that investors fear the coronavirus crisis might worsen and this could result in a shortage of supply, or lower the demand due to the lack of economic activity. But, since the UK started vaccinating people on the 08.12.2020 and many other countries are following, the worries about COVID-19 are lower than before. Observers expect the COVID-19 to ease in the future.<\/p>\n\n\n\n

The instability of the dollar index is also affecting the demand and supply of the copper as all the commodities traded on the CME market.<\/p>\n\n\n\n

Illustration of supply and demand dynamic of copper<\/span><\/strong><\/p>\n\n\n\n

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Source: http:\/\/www.kitcometals.com\/charts\/lmewarehouse.html<\/a> – consulted December 9th 2020<\/p>\n\n\n\n

Warehouse stocks level of copper is running low for mainly 2 main reasons:<\/p>\n\n\n\n