Displaying items by tag: copper

(New York)

Commodities have been doing great this year. The big rise in demand coupled with weak supplies because of COVID have led to a surge in prices. However, one bright spot—metals—might have some trouble looming on the horizon. There is increasing speculation that the US may scrap pennies. If that happens, it could put a dent in the copper and zinc markets. This dent would not only come from a lack of new demand, but the fact that pennies would be taken out of circulation and recycled. This would amplify the effect by boosting supply to the system and lowering demand for newly-mined metal.

FINSUM: This might have a strong psychological effect even though the total quantity of zinc from pennies accounts for less than 4% of total annual output.

(New York)

You have probably seen a few articles floating around, but the last several weeks have really hammered it home: we are at the precipice of a new commodities supercycle. The pandemic brought on a huge fall in commodities prices because of a tumble in demand. But as the economy is heating back up, demand is jumping and supply is not matching it. Raw materials demand has surged across the board. Most have been paying attention to oil prices, but check out others like copper and metals. Goldman sees the dawn of a new decade-long demand surge akin to what happened between 2000 and 2010, when the rise of emerging markets/BRICS drove huge raw materials consumption. This time around Goldman says that the green industrial revolution will create a “capex cycle” on part with what happened to emerging markets in the 2000s.

FINSUM: The bank also argues that social and tax policies that are favoring income redistribution to poorer households is bullish for commodities since those households tend to spend a higher percentage of it.

(New York)

There is a lot of focus right now on how great an impact coronavirus will have on the stock market, both locally and abroad. So far it has impacted stocks on certain days, with the effect immediately disappearing soon after. The reality is, however, that coronavirus’ impact may be uneven, with some sectors getting hit badly and others being fine, even as benchmark indexes might seem largely unhurt. We have already written about how luxury retail is hurting because of a lack of Chinese tourists, but now it is looking like commodities might be deeply wounded across the board. China is a huge driver of commodity markets as its demand fuels the market. And with the economy so shut down, commodity demand is going to drop off a cliff.

FINSUM: What is most worrying is that commodity prices don’t seem to reflect this at all, which means they are at risk of plummeting.

(Houston)

For those paying attention, the metals market is sending some very worrying signs. Copper and other metals have been going through a rough patch, but yesterday seemed to really spell doom. Copper plunged into a bear market, zinc plummeted, and even gold took a big hit despite the panic across markets. Industrial commodities are a good bellwether for economic activity, and while the markets are partly plunging on worries over the Chinese economy, the big drops signal that the whole world could be in for a recession.

FINSUM: We are growing increasingly concerned about the message that metals markets are sending. The big drop across the board in industrial commodities is quite worrying. Hopefully it is a short-term overreaction to the trouble in emerging markets.

(New York)

Some of the best forward looking recession indicators are in the commodities markets. Because they are generally a gauge for demand in the economy, they indicate where things are headed. Well, one of the best—copper—which is utterly ubiquitous across the global economy, is flashing some very worrying signs. Copper has had a very rough summer, but it has been worsening lately despite better share prices. The commodity just hit its lowest price in over a year. China accounts for around 40% of global copper demand. One analyst summarized the situation, saying “Copper is widely considered to be a bellwether for the global economy and so a weak price is cause for concern”.

FINSUM: Copper is partly at the mercy of the big fears in emerging markets, but that does not seem to account for the extremity of the selloff. This does worry us.