Base metals copper and steel are on the upswing today. A host of factors are affecting the supply and demand sequence, which in turn is pushing related exchange traded funds (ETFs) to a rally.
Copper prices are at their highest levels in six weeks, thanks to both a drooping dollar and concerns about supply of the metal. Anna Stablum for Bloomberg reports that copper prices have doubled this year, mostly because China stepped up its demand as its economy recovered. Investors are now speculating that demand for copper will only increase. (Read more about how copper is used here).
Meanwhile, incidents in Chile and Australia are leading to supply worries. In Chile, the BHP mines are facing a potential walkout/strike as employees are not happy with recent contract offerings. Around 20% of copper mine output is at stake. In Australia, an investigation into an accident at a mine forced the closing of the main hauling shaft.
- iPath Dow Jones AIG Copper TR Sub Index ETN (NYSEArca: JJC): up 95.7% year-to-date
Steel also has experienced rising popularity as the global infrastructure sector recovers and automakers increase demand. Sahil Mahtini and Prasenjit Bhattacharya for The Wall Street Journal report that the Steel Authority of India Ltd., India’s largest steelmaker by local capacity, expects India’s steel consumption to rise 5%-6% in the calendar year 2009, while production is expected to rise 4%-5%.
India’s leading steel companies raised prices of flat products for the second month in a row in September because of demand from automakers and a recovery in global prices.
Meanwhile, the U.S. Commerce Department launched an investigation Wednesday into whether to impose anti-dumping and duties on imports of certain steel pipes from China. Tom Barkley for The Wall Street Journal reports that trade disputes are rising as the global economy moves into recovery mode. Producers are searching for different markets to unload excess inventory.
- Market Vectors Steel (NYSEArca: SLX): up 81.6% year-to-date
For more stories about base metals, visit our base metals category.
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.