Copper - Commentary

December high-grade copper futures traded at $3.586 per pound on Thursday morning, representing a 2.85% gain on the week. The industrial metal rallied to a five-month high of $3.5905 on Wednesday following a slide in the US dollar. This was instigated by the Federal Reserve, which on Tuesday evening confirmed that it stood ready to inject another round of stimulus to reinvigorate growth. The spectre of further QE consequently weighed on the US dollar, which in turn made metals appear intrinsically cheaper in foreign currency terms. Tight global copper supplies and resilient demand for copper from emerging markets have also supported the metal’s ascent. Trade data released earlier this week showed that China’s annual consumption of refined copper rose by almost a quarter in August, thanks to a surge in imports. Meanwhile, a separate report by the International Copper Study Group showed that world refined copper consumption surpassed production by 281,000 tonnes between January and June this year. This compares with a deficit of 125,000 tonnes in the same period a year ago. Copper output at the world’s largest mine is also poised to remain tight. The chief executive of Codelco on Wednesday said that the mine’s copper output will remain unchanged at 1.8 million tonnes in 2010 and 2011. Copper has gained 8.65% on the month and in the greater scheme of things it is probably not too unreasonable to expect a bit of a pullback, perhaps on Monday when most of the Asian market resumes trading following a three-day mid-autumn festival.