Copper prices and exchange traded funds have hit three-month highs with major purchaser China taking steps to bolster its economy. Industrial metals have risen on the news.
China’s fourth quarter growth came in at 8.9%, which was higher than analysts expected, but the slowest the country has seen in two years. Authorities assume that reserve requirements for banks will ease, reports Sebastian Boyd for Bloomberg Businessweek.
“It’s a perfect result for commodities,” Diego Donadio, a strategist at BNP Paribas, said. “The result was a bit better than expected, but there is no signal from the Chinese authorities that they won’t continue with monetary easing. We expect more easing to come and growth to decelerate at a soft pace. It’s very good for Latin America.” [Chinese Demand Revives Copper ETFs]
Matt Day for The WSJ reports that copper traders found the news that China’s moderate growth in the fourth quarter was just poor enough to ensure the government officials will make efforts to ramp up economic growth. Currently, China accounts for 40% of the world’s copper consumption.
Copper for March delivery rose 9.25 to %3.7295 a pound, up 2.5%, the highest price since late September. According to Goldman Sachs, the price may climb to $9,000 a metric ton, by mid year, based on continued Chinese demand.
Meanwhile, Rio Tinto Group reported that production of the metal has fallen, which will threaten the supply when demand picks up. [Copper ETF Declines, Ending Four-Day Winning Streak]
“As long as there’s the threat of a slowdown, the pressure will be there for China to stimulate the economy,” Dennis Cajigas, a senior market strategist at Zaner Group in Chicago, said. The Rio Tinto “figures are a factor as well.”
Copper focused ETFs:
- iPath Dow Jones UBS Copper Subindex Total Return ETN (NYSEArca: JJC)
- First Trust ISE Global Copper Index Fund (NYSEArca: CU)
- Global X Copper Miners (NYSEArca: COPX)
iPath Dow Jones UBS Copper Subindex Total Return ETN
Tisha Guerrero contributed to this article.