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Despite 2013’s lackluster performance, copper started 2014 with a bang.
Earlier today, BN Americas reported that with an average 2013 close price of US$3.31 per pound, the red metal recorded its worse performance since 2009. However, despite having fallen more than 7 percent in 2013, copper was up over 4 percent in December, Reuters reported, its most impressive monthly climb since September 2012.
Those gains continued today as the red metal climbed to $7,460 per tonne in London, its highest price since early June, as a result of shrinking supply and hopes of a global economic recovery.
In terms of supply, London Metal Exchange (LME) inventories were down to 366,425 tons on December 31, while stockpiles monitored by the Shanghai Futures Exchange were down to their lowest in nearly a year. According to Michael Turek, a senior director at Newedge Group out of New York, copper prices are at last reflecting that “decreased availability” and the overall “improving global macro-economic performance.” Speaking to Bloomberg, Turek explained that “[s]ustained tightness should reinforce the overall uptrends for the foreseeable future.”
On the same note, Joyce Liu, an analyst at Phillip Futures in Singapore told Bloomberg, “[r]obust demand continues to draw down on stockpiles, not just on the LME but globally.”
However, in a classic case of “what-goes-up-must-be stopped,” the red metal’s New Year rally was cut short; it achieved a closing price of just $7,393 on the LME today. Capping copper’s gains was news of a slower-than-expected expansion in top consumer China’s factory sector over the month of December. HSBC’s Purchasing Manager’s Index and Markit Economics show a slight contraction in December, with 50.5 compared to the previous month’s 50.8. Meanwhile, Bloomberg reported that a separate gauge compiled by the statistics bureau clocked in at 51.
Gianclaudio Torlizzi, a partner at T-Commodity, told Reuters that the market could possibly see copper top out at $7,600 before it turns down. With waning momentum out of China, Torlizzi is expecting a sell off in the red metal’s future.
Company news
It has been a quiet start to the new year as far as company news is concerned, but Kombat Copper (TSXV:KBT) has gotten a head start by providing investors with a rundown of its 2014 plans. The company’s main goal is brining its Kombat mine in Namibia back into production as quickly as it can.
With that as a target, Kombat is looking to complete its technical report to define the resource, as well as defining scoping costs. The company also intends to schedule and complete the work required to bring the mine back into commercial production. Kombat plans to prioritize exploration targets and conduct further exploration.
Securities Disclosure: I, Vivien Diniz, hold no investment interest in any of the companies mentioned.
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