Bottom Line: Money managers have turned bearish on the CME copper contract as they price in the short-term impacts of coronavirus (COVID-19) on physical supply chains. Investors turned net long in December on signs of recovery in Chinese manufacturing, but shifted back to net short in January as COVID-19 gathered steam. Three-month copper on the London Metal Exchange was trading at $5,639/t on Feb. 26, down 8.9% year-to-date.
Bottom Line: Reduced output in major copper-producing countries Chile, Indonesia, DRC, and Zambia more than offset growth in other countries, according to the International Copper Study Group preliminary report for November 2019. Investors should be able to start gauging the impact of the coronavirus outbreak on the demand/supply balance when the ICSG releases February data in mid-to-late May.
Bottom Line: The coronavirus outbreak is rattling miners and equipment suppliers, according to the chief executive of Freeport-McMoRan
Bottom Line: Work has resumed at the Daye Hubei copper plant near Wuhan, the epicentre of the coronavirus outbreak, according to a firm that uses satellite to track factory activity worldwide. More than 1,000 employees were quarantined in late January, but the latest satellite images show work is being done at the plant. The report is significant because work could only have resumed with the approval of the Chinese government.
Bottom Line: The coronavirus outbreak has not affected shipments or the supply chain at Southern Copper Corp’s
Bottom Line: Barrick Gold has discussed buying the Grasberg mine in Indonesia, the world’s second-largest copper mine (and world’s largest gold mine), with mine owner Freeport-McMoRan. But Freeport chief executive Richard Adkerson said now was not the time for a deal because the mine is moving from open-pit to underground mining and Freeport’s stock is too low. Freeport has fallen 21% year-to-date over coronavirus and copper price concerns.
Bottom Line: Northern Dynasty Minerals Ltd.
Bottom Line: Lundin Mining Corp.
This has been a disastrous week for capital markets, and the copper sector is no different. All the copper stocks on our watchlist fell this week, with most dropping by double-figure percentages.
Copper is used for a wide variety of industrial applications, such as electrical applications, telecommunications, and power generation, and is, therefore, more susceptible to global economic events than other metals.
There’s no getting around the fact that a prolonged coronavirus outbreak will be bad for copper producers. On the other hand, if the coronavirus can be contained in the near-term, then copper stocks should rebound in a meaningful way and possibly outperform the general market.
The COPX ETF plummeted to new lows amid the market’s reaction to the coronavirus. In contrast, Northern Dynasty broke out of their sideways move after a positive report from their Pebble project.
Global X Copper ETF 3-Month Performance
Northern Dynasty Minerals Breakout
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