Enticed by low prices, China stockpiled copper and other commodities and now controls the fate of copper prices and has the potential to move both futures markets and related exchange traded funds (ETFs).
James Campbell of The Wall Street Journal reports that China’s State Reserve Board holds at least 235,000 metric tons of copper, nearly as much as the London Metal Exchange warehouses hold to back futures trading. The nation as a whole holds nearly one million tons of copper in total, the amount equivalent to a month’s global consumption.
Many feel that China can’t possibly keep stockpiling and driving up the price of copper. After all, an official from China’s National Development and Reform Commission last month said that stockpiling has come to a halt. So does this mean that copper will lose its luster?
On the other hand, copper is still relatively cheap and China may continue to keep stockpiling despite what reports have indicated. Additionally, the demand for the bronze-colored metal may be further boosted in the nation as a result of investment in power-generation capacity, a recovering construction industry and surging car sales.
- iPath DJ-AIG Copper Total Return Sub-IndexSM ETN (JJC): up 69.3% year-to-date and trading above its 200-day moving average.
- iShares MSCI Chile Index Fund (ECH): up 59.7% year-to-date and trading above its 200-day moving average; Chile is the world’s largest exporter of copper.
For more stories on copper, visit our copper category.
Kevin Grewal contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.