Base Metals Weekly Round-Up: Copper Ends Year at 8 Month High

Copper prices were on the rise on Friday (December 27), buoyed partially by optimism about a phase one trade deal between the US and China. 

Three month copper on the London Metal Exchange (LME) is on track to rise 1.2 percent for the week after opening the day at US$6,256 per metric ton, its highest point since May 7.

According to Reuters, the red metal’s LME price rise follows a rally in the February copper contract on the Shanghai Futures Exchange. The contract rose 0.5 percent on Wednesday (December 25), 0.2 percent on Thursday (December 26) and increased by a further 0.1 percent on Friday.

As mentioned, an expected initial trade deal between the US and China is one factor pushing copper prices upward. The two powerhouses have been locked in their dispute for about a year and a half, but reports indicate that a deal is close, with both countries completing required pre-signing procedures.

Details on what the phase one deal entails are not yet completely clear, but reports indicate that it will involve the US cutting its tariff on around US$120 billion in Chinese goods from 15 percent to 7.5 percent; a further US$250 billion in Chinese goods will stay at a 25 percent tariff level.

China has not set up tariff reductions, but has said it will raise its purchases of American goods and services by at least US$200 billion over the coming two years. The first phase of the deal also covers intellectual property commitments and includes a mechanism for dispute resolution.

A final trade deal does not appear to be in the cards in the near future.

“A simmering down in trade tensions should be good for the world economy but a full and final settlement doesn’t look imminent,” a senior trader told Reuters on Friday.

The news outlet notes that positive economic data out of China has also provided positive momentum for copper. The country is the largest source of copper demand by far, directing the metal primarily toward industrial applications.

In other copper news, Barnaby Mulenga, Zambia’s ministry of mines permanent secretary, said on Thursday that the country plans to ask copper producers in the country to account for their gold output as well as their copper output.

Currently only First Quantum Minerals’ (TSX:FM,OTC Pink:FQVLF) Kansanshi mine is declaring its gold production, and the nation is missing out on revenue as a result. Other companies have said that the amount of gold they produce is insignificant and should be sold as copper, but Mulenga disagrees.

“Some mining companies have been claiming that it is more of an impurity but gold is precious and can’t be an impurity,” he said at a news conference.

In terms of other base metals, LME zinc was at US$2,276.50 per metric ton as of Tuesday, while LME nickel was at US$14,285 per metric ton and lead on the LME was at US$1,904 per metric ton. Iron ore for May 2020 was changing hands at US$91.83 per metric ton on the Dalian Commodity Exchange on Friday.

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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.