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Storm Flags Are Up in the Copper and Metals Markets

The weekly bar chart still shows copper contained within the $2.70 to $2.85 range, but copper, aluminum, lead, tin, and nickel are all hanging on by a thread to their respective support lines, while zinc is correcting from its precipitous decline.

The single red triangular flag that was indicating “Small Craft Warning,” is now two triangular flags, advising us of “Gale Force Warning.” Where to begin?

Most nonferrous markets lost more ground last week, despite more metal moving out of warehouses. But the exception, however, is found in Shanghai, where inventories have risen over the past four consecutive weeks, with some 37,900 mt of excess metal moving into storage.

What is this telling us?

Elsewhere in copper, while prices have fallen appreciably over the past few months, the market is advising us of tightening conditions, with the appearance of a backwardation on the LME in the Cash to 3s, and on Comex in the nearby months.

On a more macro basis, the weekly bar chart still shows copper contained within the $2.70 to $2.85 range, but copper, aluminum, lead, tin, and nickel are all hanging on by a thread to their respective support lines, while zinc is correcting from its precipitous decline.

Of equal, if not greater importance, equity markets fell further last week, accompanied by heightened volatility. The S&P 500 is now in negative territory on a year-to-date basis, and is currently trading below its 52-week moving average. Also, with just a few exceptions, equity markets around the world are all in the red this year.

Over the past 30 years or so, as the first chart in this week’s report illustrates, the price of copper does not track very closely with the S&P 500, except during periods when equities fell sharply as in 2000 – 2001, and 2008, and copper was dragged lower as well.

If in the event global stock markets fall further, it will come as no surprise to see copper prices also retreat, regardless of fundamental expectations.

 

John Gross publisher of The Copper Journal and is one of the metals' industry's best resources on copper pricing trends.

If you would like to learn more about how to manage your wire and cable inventory in this volatile market environment, email John at by clicking here or calling him at 631-824-6486.

 

 

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