Fresh Oversupply Worries Jolt Copper
April 27 2018 - 10:31AM
Dow Jones News
By Amrith Ramkumar and David Hodari
Copper prices fell Friday on worries that the market will
continue to be well supplied, limiting future gains.
Copper for July delivery shed 2.5% to $3.061 a pound on the
Comex division of the New York Mercantile Exchange. Prices had
risen in four straight weeks entering this one but have tumbled of
late and are down more than 7% in 2018, after hitting a nearly
four-year high late last year.
Investors are worried that the supply disruptions that buoyed
prices last year from mining labor contract renegotiations and
other conflicts with host governments haven't materialized yet in
2018, meaning the market could continue to be well supplied.
On Friday, the International Copper Study Group said it now
expects a small supply surplus in 2018, after previously projecting
a deficit
"The switch to surplus is due to stronger than previously
anticipated growth in refined copper production," the group said in
a statement with its latest forecasts.
Traders were also reacting to news from U.S. giant
Freeport-McMoRan Inc. that its latest spat with the Indonesian
government regarding control over the world's second-largest copper
mine, Grasberg, hasn't yet affected production. Indonesia recently
said it wanted Freeport to meet new environmental standards in just
six months, the latest barb in an extended back-and-forth between
the two sides.
Another prominent copper producer, Norilsk Nickel, said Thursday
that first-quarter copper production rose 18% from a year
earlier.
Still, some analysts expect the uncertainty surrounding
Freeport's negotiations with Indonesia and labor negotiations at
the BHP Billiton-operated Escondida mine in Chile to boost copper
moving forward as consumption data from China, the world's largest
consumer, picks up steam.
Long-term investors have also been encouraged by the lack of
growth projects that could boost copper supply in future years, and
the ICSG reiterated Friday that it expects a supply deficit in
2019.
Elsewhere in base metals, aluminum for delivery in three months
on the London Metal Exchange declined 1.4% to $2,244 a metric ton,
continuing a recent bout of extreme volatility. Prices surged
Thursday on a Bloomberg report that sanctioned Russian metals
tycoon Oleg Deripaska, who controls aluminum giant United Co.
Rusal, wants to keep control of the company, potentially creating a
standoff with the U.S. government.
The U.S. has said it might relieve sanctions if Mr. Deripaska
sells his stake. Rusal denied the report was accurate, and some
analysts think it is a negotiating tactic by Mr. Deripaska to
pressure the U.S. or get a better deal if he sells.
Worries about supply tied to Rusal has jolted the aluminum,
palladium and nickel markets this months, but some analysts expect
a resolution to calm traders moving forward.
Among precious metals, gold for June delivery inched up 0.3% to
$1,321.80 a troy ounce from its lowest close in more than a month.
Prices have fallen recently with the dollar rising, as a stronger
dollar makes commodities denominated in the U.S. currency more
expensive for overseas buyers.
Write to Amrith Ramkumar at amrith.ramkumar@wsj.com and David
Hodari at David.Hodari@dowjones.com
(END) Dow Jones Newswires
April 27, 2018 10:16 ET (14:16 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
Freeport McMoRan (NYSE:FCX)
Historical Stock Chart
From Mar 2024 to Apr 2024
Freeport McMoRan (NYSE:FCX)
Historical Stock Chart
From Apr 2023 to Apr 2024