The term Doctor Copper is market lingo for the copper’s ability to predict turning points in the global economy. Copper has many uses…from homes, electronics and transmission, etc., its used as a leading indicator of the economic. Rising copper prices imply demand or a growing global economy and declining copper prices imply lack of demand or a slowing global economy.
I read an article this past weekend talking about what I prefer to as the supply and demand equation for copper.
The global copper market is expected to witness an undersupply scenario ahead as the pace of new mine supply is expected to slow due to decline in output from the Indonesia copper mine, while the demand growth will remain strong in the coming years.
China’s copper imports in January have risen by 8.2 percent at 4,79,000 tonnes. Also, another supportive factor is the global copper stockpiles currently not so far from decade lows.
Looking at the fundamentals, we believe copper prices are likely to trade positive in the coming quarter. Higher copper imports in China and lower mine supply from Indonesia are expected to provide support in 2019. We expect the global copper market to show a higher deficit in 2019 surpassing ICSG forecast of deficit of just 65,000 tonnes.
Copper prices have been range bound since mid 2018. Although copper has an inverse relationship with the US Dollar, it does appear prices have been on pause until a China-US trade outcome.
If the US and China are able to reach a deal, the chart suggests prices will break to the upside. However, it could be a sell the news scenario because above the resistance line sits not one, but two daily supply zone.
This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.