leadf
logo-loader
viewLundin Mining Corporation

Copper price surges to a two-year high, as Chinese economy accelerates and stimulus packages proliferate

A combination of Chinese economics and American politics seems to be pushing up the price

Lundin Mining Corporation -

The copper price pushed past US$7,000 per tonne this week, as traders bought in after apparent progress in talks between Republicans and Democrats in the US in relation to a new stimulus package.

According to a back-of-the-envelope calculation published by broker SP Angel, the world has now pumped around US$17tn in stimulus into the various regional economies in response to the coronavirus crisis.

Whether that new money will help in any way to solve ongoing structural problems with the global economy is an open question, but in the short term the expectation, and increasingly now the reality, is that a good portion of that new money is being allocated to copper.

Copper is often referred to as the bellwether metal, because demand for it often runs in parallel with times of economic expansion since its uses are so widespread. In particular the metal is used in construction and manufacturing, with bulls in recent years pointing increasingly to the amount of wiring used in electric vehicles as a likely additional source of demand in the future.

However, some of the most recent strength is also attributable to supply worries, as the International Copper Study Group predicted this week that global copper mine production is likely to decline by about 1.5% in 2020, primarily due to coronavirus-related disruptions at the operational level.

Separately, industrial action and protest is also currently disrupting supply from Codelco, the parastatal that accounts for the major proportion of Chile’s production, while work at Lundin Mining’s (TSE:LUN) Candelaria mine, also in Chile has also been suspended for similar reasons.

Having said all that, broker SP Angel noted that it’s not entirely clear where the recent surge in buying that pushed the copper price over US$7,000 actually came from. Traders argue that the price is too high for China’s State Reserve Bureau, and that in the absence of any new ETFs the best bet is that Asian investors are viewing copper as a good long-term hedge.

That’s partly because in the background, partially obscured from view by continued fretting in Western markets about coronavirus, China has resumed its economic expansion, boosting GDP by 4.9% during the third quarter, up from the virtually stalled 0.7% returned for the quarter to end-June.

All of which is likely to benefit those that are already strongly positioned in the copper space, including at the top level Glencore (LON:GLEN) and Rio Tinto (LON:RIO), and further down the ladder companies like Arizona Metals (CVE: AMC), Atico Mining (CVE:ATY), 3 Metals (CVE:CCCM), Doré Copper (CVE:DCMC), Filo Mining (CVE:FIL), and Kutcho Copper (CVE:KC).

For its part, SP Angel favours Arc Minerals (LON:ARCM), Empire Metals (LON:EEE), Phoenix Copper (LON:PXC), SolGold (LON:SOLG), and Strategic Minerals (LON:SML) for its Australia copper asset at Leigh Creek.

Shore Capital likes Maricama Copper (CVE:MARI).

Quick facts: Lundin Mining Corporation

Price: 10.32 CAD

TSX:LUN
Market: TSX
Market Cap: $7.57 billion
Follow

Add related topics to MyProactive

Create your account: sign up and get ahead on news and events

NO INVESTMENT ADVICE

The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is...

FOR OUR FULL DISCLAIMER CLICK HERE

FansUnite Entertainment pleased Canada taking a look at allowing single...

FansUnite Entertainment (CSE: FANS- OTCQB: FUNFF) President Darius Eghdami joined Steve Darling from Proactive with news the company is hailing the Canadian government’s decision to introduce legislation that would legalize single-event sports betting in Canada. Eghdami talks about why that...

3 hours, 48 minutes ago

3 min read