Copper Stays Afloat Despite Mixed Signals

Base Metals Investing

Copper ended in the black on Thursday after traders weighed the impact of the mixed economic data coming from the U.S. and the upcoming holiday week in China.

Copper ended in the black on Thursday after traders weighed the impact of the mixed economic data coming from the U.S. and the upcoming holiday week in China.

Copper futures made the most gains since September 19, climbing 1.1 percent on Thursday to settle at $3.307 per pound on the Comex division of the New York Stock Exchange. Across the pond, copper for three month delivery also made some slight gains, edging up 0.7 percent to close the day at $7,251 per metric ton on the London Metal Exchange.

A mixed bag a news from the U.S. put a cap on most of copper’s gains, but still let the red metal climb higher. This week a report out of the U.S. that showed the economy of the red metal’s second largest consumer expanded at a faster-than-expected pace in the second quarter of the year. The country’s gross domestic product climbed at an annualized rate of 2.5 percent in Q2, compared to 1.1 percent in the first three months of the year. Weekly jobless claims were also better-than-expected, and generally viewed as better news than the GDP, helped give the greenback a small boost all the while adding some pressure to gold and silver.

Speaking to Bloomberg, Michael Smith, the president of T&K Futures and Options in Port St. Lucie, Florida said “The growth report is a good number, and as long as that holds up, it’s good for copper.” Smith went on to explain that “China and Europe have also bottomed,” implying that industrial demand will be higher.

The Wall Street Journal cautioned market watchers that copper traders are treading with caution as we move into the first week of October, particularly ahead of a possible U.S. government shutdown early next week. According to the publication, lawmakers need to agree on a funding bill by October 1, the start of the new fiscal year. If an agreement is not reached, the federal government will have to suspend a good portion of its activities and services.

“Copper is going to get smashed along with equities if we have a government shutdown,” Adam Klopfenstein, a senior market strategist with Archer Financial Services LLC, warned.

Company news

Chile’s state-owned copper giant, Codelco, is hoping to see a significant spike in copper premiums next year, especially as demand from top consumer – China – increases. However, while the company is looking for a hike in premiums, it remains realistic that the jump will likely be lower than expected.

According to Mining Weekly, Codelco “expects the rise won’t be “enormously different” to that touted by Europe’s biggest copper smelter Aurubis, which has said it expects to raise premiums by 22% to around $105/t next year.”

The company, whose premiums for copepr are an industry benchmark, is hoping that the rate will reflect renewed interest in the copper market.

Southern Copper (NYSE:SCCO) is not expecting a planned strike by workers in Peru to affect its production. Marketwatch reportd that the company told the Peruvian securities regulatory body that the company had been given an official notification from the National Federation of Mining and Metallurgy advising it of the 48-hour strike on September 26.

“Southern Copper’s operation in the area of the strike, if it goes ahead, will continue to function normally due to the implementation of an emergency plan, which will allow the company to maintain normal levels of production,” said a Luis Echevarria, a company representative.

McEwen Mining (TSX:MUX) updated its preliminary economic assessment for the Los Azules Copper project this week. The report demonstrated the project’s potential to become one of the largest, lowest-cost copper mines in the world. Highlights from the company’s assessment include a pre-tax NPV of $3.8 billion with an 8 percent discount rate and an IRR of 17.6%. After tax Los Azules will have a $1.7 billion NPV at an 8 percent discount and an IRR of 14.3%. Furthermore, the company expects an annual copper production of roughly 255,000 tonnes for the first five years.

Also this week, Equinox Copper (TSXV:EQX) announced that as of September 23 it will be changing its name to Anfield Resources Inc, and updated its ticker symbol to ARY. The company also noted that the Toronto Venture Exchange has also approved a consolidation of the company’s common share capital “on the basis of one (1) post-consolidated common share for every ten (10) preconsolidated common shares held.”


Securities Disclosure: I, Vivien Diniz, hold no investment interest in any of the companies mentioned.  

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