CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure. CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure.

Copper price benefitting from both demand and supply side catalysts

The long-term uptrend for the copper price continues as traders balance supply side disruptions in South America against demand side assumptions from a recently proposed infrastructure bill.

Demand-side assumptions

Copper, often considered a leading indicator for economic health, has seen gains this year precede upward revisions for global growth. The International Monetary Fund (IMF) now expects gross domestic product (GDP) growth of six percent globally, led by emerging and developing Asia (est 8.6% year-on-year growth). IMF forecasts for 2021 also anticipate 6.4% GDP growth in the world’s largest economy (the US), 4.4% growth in the Euro area, 4.6% in Latin America and 3.4% in Sub-Saharan Africa.

China remains the primary consumer of industrial metals, most significantly copper and iron ore. Infrastructure spend and stimulus efforts within the region are supporting gains in the metal, although rising prices have started to fuel inflationary fears which could prompt monetary tightening by the People’s Bank of China (PBOC). However, the PBOC is quick to reassure markets that any changes to policy would be gradual and the central bank has pledged not to make any sudden ‘U-turns’ on its accommodative stance.

In the US, the White House has proposed a new $6 trillion budget, with significant allocation towards infrastructure spend, which is also helping buoy short-term gains in the commodity. In president Joe Biden’s proposed budget, an ambitious $2.3 trillion is allocated over the next three years to roads, rails, electric transport and green energy projects.

Major copper producers’ supply-side disruption

Supply-side concerns for copper are extending from the world’s two largest producers of the metal, namely Chile and Peru.

In Chile, workers have downed tools on failed wage negotiations at BHP Group’s Escondida and Spence mining operations. Escondida is the world’s largest copper mine.

In Peru, markets are monitoring campaigning ahead of next month’s presidential elections. Socialist candidate, Pedro Castillo, has suggested that if elected he would look to increase mining royalties and taxes as well as renegotiate large mining contracts within the region.

Copper price – technical analysis

The copper price remains in a long-term uptrend as indicated by the 50-day simple moving average (SMA) - green line - trading firmly above the 200-day SMA (blue line). In the short term, we see the price breaking out of a bullish flag formation (shaded area).

The flag breakout suggests that the short-term trend is now aligning with the longer-term uptrend. Trend followers and pattern traders would look for long entry around current levels, targeting a retest of the high at 1075. Should the copper price instead move to close below the reversal low at 9795, the bullish short-term assumptions would be deemed to have failed.

Summary

  • Copper looks to be renewing its long-term uptrend
  • Chile and Peru are the world’s two largest producers of copper
  • Labour disruptions in Chile are causing supply concerns
  • Electoral campaigning in Peru has seen socialist candidate Perdo Castillo wanting to increase royalties and taxes for miners
  • Economic growth has been revised higher by the IMF
  • Chinese stimulus and infrastructure initiatives are supporting growth and in turn demand
  • US infrastructure spend of $2.3 trillion has been proposed supporting demand-side assumptions for copper
  • A technical analysis view sees an upside breakout in line with the longer-term uptrend


This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.

React to volatility on commodity markets

Trade commodity futures, as well as 27 commodity markets with no fixed expiries.

  • Wide range of popular and niche metals, energies and softs
  • Spreads from 0.3 pts on Spot Gold, 2 pts on Spot Silver and 2.8 pts on Oil
  • View continuous charting, backdated for up to five years

See opportunity on a commodity?

Try a risk-free trade in your demo account, and see whether you’re on to something.

  • Log in to your demo
  • Try a risk-free trade
  • See whether your hunch pays off

See opportunity on a commodity?

Don’t miss your chance – upgrade to a live account to take advantage.

  • Analyse and deal seamlessly on fast, intuitive charts
  • Get spreads from just 0.3 points on Spot Gold
  • See and react to breaking news in-platform

See opportunity on a commodity?

Don’t miss your chance. Log in to take your position.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
liveprices.javascriptrequired
liveprices.javascriptrequired
liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

Plan your trading week

Get the week’s market-moving news sent directly to your inbox every Friday. The Week Ahead gives you a full calendar of upcoming economic events, as well as commentary from our expert analysts on the key markets to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.