Renewed rally supported by the four C’s: copper, crude oil, coffee and corn
Copper rallied to retrace more than half of its recent 9% correction on supply concerns, and after the market concluded Chinese measures to curb speculation and hoarding would primarily be focusing on the highly polluting steel industry. The threat of strike actions by individual groups at BHP in Chile, who operates the world’s biggest copper mine, helped further improve sentiment. Not least given the prospect of strong and rising demand over the coming years for so-called green metals such as nickel, aluminum, nickel, platinum and all-important copper. Following its shallow correction to a one-month low at $4.44 per pound, high-grade copper has recovered, with a break above $4.72 potentially signaling a return to the May 10 peak at $4.88 and above.
Crude oil futures found a fresh bid with surging U.S.-led demand offsetting concerns about the prospect of rising Iranian supplies. The rally was led by WTI which on a closing basis reached a two-year high while Brent once again has been taking a closer look at $70, the top of the recent range. Focus turning to next week’s OPEC+ meeting where the group, despite uncertainties about future Iranian output, is expected to confirm an already agreed 0.8 million barrels per day increase for July. Until the market receives more clarity about the outcome of the U.S.-Iran negotiations, and the global recovery in fuel demand becomes more synchronized, the upside potential beyond the March high at $71.40 seems limited.
Arabica coffee prices jumped 7% on the week to reach a 4-1/2 year high above $1.6 per pound. Prices have soared recently amid concerns about supplies from top growers Brazil where drought continues to see output projections slip, and Columbia where political protests have held up shipments since the end of April. Key to the short-term direction remains these two developments but with the prospect for colder weather in Brazil adding the risk of frost on higher grounds, the outlook points to further support.
Corn surged the most in two years, further recovering from the recent rout which resulted in a top to bottom correction of 18%. This after weekly export data showed the second largest ever sale since 1990. After hitting a one-month low on Wednesday at $6.03, the July contract rose by the exchange allowed limit to $6.6450, thereby pulling both wheat and especially soybeans higher with it. The sale primarily driven by another bumper order from China a reminder that the country, despite attempts to clamp down on speculation and hoarding, will continue to drain global supplies in order to feed the expansion of the world's biggest hog herd.