Copper sellers on pullbacks?
Copper prices took a tumble last week as Copper took its first monthly decline in 5 months.
Rising COVID-19 cases and falling expected global demand has been the reason. Furthermore, mine output is now increasing.
According to a Bloomberg Intelligence Analysts reports copper mining output will rise 3.5% from 2021 to 2023 after a fall of almost 3% in 2020 based on individual forecasts for 127 mines covering 80% of the global industry. A key quote from the report is that 'While growth on a sequential basis tails off as each successive year passes, the market's ability to digest this new supply will be put to the test quickly'.
Stockpiles increasing
Last week LME Copper stockpiles hit two month highs. Copper inventories tracked by the London Metal Exchange jumped by 33,200 tons to 136,325 tons. This put copper inventories at their highest last week since late July.
Strike risk from Escondida
One area to watch for short term copper sellers is if there is a strike in the world's largest copper mine, Escondida. It is located in Northern Chile. Here is a picture of it.
The Union members have rejected Escondida's final offer in wage talks and the BHP owned operation have requested a five day mediation period. These talks could be extended but a shutdown in the mine could offer copper some near term support.
The big picture for copper remains bullish as green technology is going to be heavily dependent on copper. Once global growth gets back in track you would expect copper gains. However, for now it is reasonable to expect sellers on pullbacks for the short term.
