4 Reasons to Mind the Copper ETF Rally

February 8th at 11:00am by Tom Lydon

Copper prices have hit their lowest point since Oct. 19, and are 20% below this year’s high price. Enter the bargain hunters, out buying everything from copper exchange traded notes (ETNs) to the physical metal.

Why is copper on such a tear?

Bargain Hunting. As copper prices have evened out to lower levels, the case for demand in China seems to stick. Michael Taylor and Pratima Desai for Reuters reports that a frenzied selloff across equities and commodities because of sovereign default fears and a stronger dollar last week pushed copper to its lowest price since last October and 20% off the high price hit on Jan. 7. [Copper Equity ETF in the Pipeline.]

China. Claudia Carpenter for BusinessWeek reports that speculation indicates that prices are low enough to spur imports by China, the world’s largest buyer of the metal.

Inventories Down. Inventories of copper in Asian warehouses are down for a 12th consecutive day, the longest decline since May. Prices for copper in Shanghai are about 5% more expensive than on the London Metal Exchange. [How Emerging Markets Impact Base Metals.]

Sebastian Boyd for BusinessWeek reports that Chile posted a trade surplus of $2.1 billion in January, the biggest since March 2008. The price of copper, Chile’s biggest export, reached a 16- month high last month as the global economy recovered and workers at Chile’s state-owned producer Codelco went on strike. The country rests in a good position to profit as the copper sentiment remains positive now. [How the U.S. Dollar Affects Copper Prices.]

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