While the short-term outlook for copper continues to be challenged from the risk an economic slowdown, the lack of big mining projects to ensure a steady flow of future supply in the coming years continues to receive attention from long-term focused investors as it supports a structural long-term bullish outlook, driven by rising demand for green transformation metals and mining companies facing rising cash costs driven by higher input prices due to higher diesel and labour costs, lower ore grades, rising regulatory costs and government intervention, as seen by the current crisis in Panama, and not least climate change causing disruptions from flooding to droughts.
Copper remains the best performing industrial metal this year, trading up 3% despite all the worries related to the Chinese property sector, and together with lead it has so far helped limit the year-to-date sector loss to around 11%, partly offsetting heavy losses in nickel and zinc. Speculators, such as hedge funds and CTA’s, have been holding a relatively small net short position in HG copper since August, and with the gross long and short both staying elevated, it highlights the current range bound market which for a while now has not forced any major change in positioning. That status que is likely to be kept until fresh momentum can be established, either below $3.54 or above the 200-day moving average.
We keep a structural long-term bullish view on copper and with that also copper related mining companies that will benefit from higher prices.