Copper Prices Still on the Rise

Base Metals Investing

Copper prices continued on a winning streak this week, rising to $2.29 per pound on Thursday.

Copper prices continued on a winning streak this week, rising to $2.29 per pound on Thursday. The red metal has gained 17 percent since January 15, and recently got another boost when the US dollar fell following the latest US Federal Reserve meeting.
The Fed wrapped up its most recent two-day meeting this week, announcing that it will leave the target range for the benchmark interest rate unchanged at 0.25 to 0.5 percent. As noted by The Wall Street Journal, that outcome was more dovish than expected, and is a boon for metals prices. Rising oil prices have helped to provide some support as well.
“The fact that the U.S. Federal Reserve has signaled that it will not be raising interest rates quite as sharply this year as previously predicted is driving metal prices up significantly,” states a note from Commerzbank (ETR:CBK).

Copper prices have been on the rise for most of February, fueling expectations that a bottom has been reached, according to FocusEconomics. “On 11 March, the spot price was USD 4,987 per metric ton, which was up 11.9% from the same day in February and was 6.0% higher on a year-to-date basis,” the firm notes in a recent report. “Nevertheless, this was down 13.3% from the same day in 2015.”
More broadly, FocusEconomics states that the recent uptick in copper prices has been caused by a number of factors, including production cuts from copper producers and expectations for fiscal stimulus in China. Positive expectations for global growth on the back of strong US data has also given a boost to the red metal.
Still, it remains to be seen just how long this particular copper rally will last. Analysts surveyed by FocusEconomics expect prices to remain fairly low in 2016, with a bit more of a pickup coming in 2017. “[N]ext year a moderate recovery in prices is expected to be underpinned by lower excess supply as mines are gradually lowering production,” the firm’s report reads.
Currently, the consensus forecast is for copper prices to rise to $4,904 per tonne in Q4 2016, averaging $4,824 for the year. Analysts expect the annual average to rise to $5,120 in 2017.

Company news

Rio Tinto (NYSE:RIO,LSE:RIO,ASX:RIO) announced this week that Sam Walsh will step down as CEO of the company this July. He will be succeeded by Jean-Sébastien Jacques, the company’s current chief executive for copper and coal.

In an interview with The Wall Street Journal, BHP Billiton (NYSE:BHP,ASX:BHP,LSE:BLT) CEO Andrew Mackenzie stated that the company is once again looking at copper and petroleum assets. “We are very active in looking at areas where we might acquire assets that would fit very well within our portfolio and that would increase the scale of the company without increasing its complexity,” he told the publication.
Meanwhile, PolyMet Mining (TSX:POM,NYSEMKT:PLM) said that that the first step in the formal state permitting process has been initiated for its NorthMet project in Minnesota. The company received approval for its final environmental impact statement for the project earlier this month.
Finally, Duran Ventures (TSXV:DRV) signed an option agreement for its Panteria copper-gold project in Peru with Minera Antares Peru, a subsidiary of First Quantum Minerals (TSX:FM,LSE:FQM). Under the terms of the agreement, First Quantum may conduct due diligence on the project for up to 18 months before earning up to 80 percent of the project with staged payments over five years.
Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article. 
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