A Copper Conundrum

John Gross, publisher of The Copper Journal and an expert in hedging and other price management strategies, is watching the turbulent copper market particularly close this year. Here’s his most recent analysis.

In the most recent Copper Journal, I said metal prices moved higher because they were deeply oversold, and that the dollar had come off a bit. Well, that argument was short lived, as the dollar rose last week while copper fell back again, and is in danger of testing recent lows.

Indeed, the dials on our copper dashboard have moved from “yellow – caution” to “orange – be very careful before it is too late.” That is to say, if we take out the recent low of $2.6245, then we are potentially looking into the abyss of still lower prices.

And it’s here we visit the point of departure between logic, and everything else that drives markets. As a point of reference, copper inventories held in exchange warehouses, ostensibly representing the surplus or deficit in global market conditions, stood at a five-year high of 901,818 metric tons on March 30, 2018, with the Spot price on Comex closing that day at $3.0190.

This past Friday, inventories stood at 576,782 metric tons and Comex copper closed the week at $2.6490. Thus, inventories fell 325,036 metric tons, or 36%, and the price fell 37¢, or 12%, bringing us closer to bear market territory.  There is no easy explanation for this economic injustice, but it reminds us tools exist to help manage and mitigate price risk exposure.

Need to learn more about profitably managing your wire and cable inventory or hedging strategies? Contact John at [email protected] or 631-824-6486.