The High Stakes in Copper’s Future

Copper price

Copper prices have retreated once again. Currently, it’s down 0.8% to US$6,810 per tonne. But traders are looking to the future and in turn, the futures market. And some of the stakes are growing to extremes.

Bloomberg reports that some traders are betting on copper to maintain its upward price momentum. With some rather bold predictions as well:

Call options wagering on copper climbing above $10,000 a metric ton by December 2018 have started trading during the past two weeks, London Metal Exchange data show. In total, traders have spent about $4.5 million on the contracts.

Copper hasn’t traded at those levels since 2011, the peak of a commodities boom mainly fueled by a roaring economy in China, the biggest user. The bulk of the wagers came last week during the mining industry’s annual gathering in London and suggests traders are becoming increasingly bullish on demand driven by electric cars.

Remember, we are talking about a metal that has already risen 23% this year. Recently posting a three-year high as well. So while some analysts are eyeing off a longer bull run, others are turning towards bearish sentiment.

Just look at Bloomberg’s recent survey results of traders and analysts:

  • Bullish: 4
  • Bearish: 6
  • Hold: 2

So while some traders are betting big on copper’s future, they certainly aren’t in the majority. It seems the traders may have gone a little crazy. I suppose they’re hoping the price for copper does the same…

Meanwhile, in other markets:

Oil Brent Crude Price — US$63.91 per barrel: +0.66%
Nickel Price — US$12,560 per tonne: -1.88%
Gold Price — US$1,283 per ounce: +0.6%
Iron Ore Price — US$62.32 per tonne: +0.1%

Oil Markets Influenced by Saudi Shake-up

The ongoing supply cuts from OPEC (Organisation of the Petroleum Exporting Countries) are looking increasingly more likely to be extended. With Saudi exports set to be cut by 120,000 barrels per day in December. But the real news that sent oil’s price higher this week was on the political front.

Rumours are circulating that Saudi King Salman may relinquish the throne to his son, Crown Price Mohammed Bin Salman. The same rumour that has been around for the past two months.

This time though, the Crown Prince has made his boldest move yet. This week, a swift but thorough purge of corrupt officials has hit Saudi ministries, with dozens of some of the richest and most powerful men detained by a new anti-corruption committee.

Though, experts are saying this short uptick in oil prices from the Saudi clean-up is temporary. With supply cuts and OPEC decisions, likely to dictate the price once more when the dust settles.

Nickel Gets a Reality Check

Nickel prices have fallen after the three months future contracts fell 3.2% yesterday. Despite last week’s surge thanks to a positive outlook on EV demand, China’s steel industry is still the key to short-term pricing.

And fresh speculation from traders suggests that stainless steel demand isn’t strong enough. Which sparked a sell-off, with one analyst noting that, ‘traders are rushing to close long positions to limit losses’.

It seems the Nickel boom will have to wait a little while longer.


Gold Demand Hits an Eight Year Low

Despite gold’s price creeping slightly higher overnight, a fresh report by the World Gold Council paints a different picture.

Demand for the yellow metal is falling, with a sharp drop in the third quarter of 9%. Bringing overall year-to-date demand down to 12%.

According to the report global jewellery demand was down 3% year-on-year for the three-month period, hurt by a new sales tax and tighter anti-money laundering regulations governing retail jewellery transactions in India, the world’s number one consumer of the metal. Jewellery demand on the subcontinent was down 25% to just shy of 115 tonnes. In contrast US jewellery demand so far in 2017 is at a seven-year high.


Iron Ore Treads Water

The iron ore market once again hasn’t made any major moves. Continuing to maintain its price point around the US$62 mark. Though, it’s still well under the recent high in August when it eclipsed $80 briefly.

Rio Tinto executive Mal Randall believes iron ore has a bright future, though. At least for miners with higher grades. He states:

Unless some of the more marginal players can find some sort of silver bullet to lift grades and lower impurities, they’re going to be in trouble’.

Suggesting that with China’s pollution crackdown, demand for higher grades will increase in order to meet emission targets. It certainly would be a welcome development for some of our miners.

It’s also why our resource expert, Jason Stevenson believes resource stocks are still a winner. Find out why, right here.

Regards,

Ryan Clarkson-Ledward,
Junior Analyst, Markets & Money

Ryan Clarkson-Ledward

Ryan Clarkson-Ledward

Ryan has degrees in both communication and international business. His priority is bringing you the latest price updates on stocks through ASX updates, as well as supporting Sam Volkering with background research. As part of the team at Markets & Money his aim is to provide unbiased and relevant news for readers.

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