The iPath Bloomberg Copper Subindex Total Return ETN (NYSEArca: JJC) jumped more than 2% last week, bringing its year-to-date to over 9%, but some commodities market observers believe the red metal could be poised for a pullback.
Copper prices are benefiting as investors anticipate greater demand out of China and increased infrastructure projects under President Donald Trump. Some professional traders are reacting by increasing bullish bets on the red metal.
Industrial metals like copper, nickel, iron and steel have all rebounded in recent months as traders bet on improving global economic conditions would bolster demand for the base metals after prices hit multi-year lows.
Copper prices recently spiked amid news of a workers strike at a major copper mine in Chile, the world’s largest producer of the red metal. However, labor tensions appear to be cooling, which likely explains why JJC backed off its recent highs.
“Striking workers at Chile’s massive Escondida copper mine and mine operator BHP Billiton said they have agreed to renew talks on Wednesday, Reuters reported, sparking hopes of an early settlement to the six-day stoppage,” reports CNBC.
“The dip in copper comes amid a backdrop of supply concerns that has helped the metal gain more than 8% since the year began. In Chile, workers are striking at the Escondida mine, the largest copper mine in the world, over a pay and benefits dispute with management. The mine is majority-owned by BHP Billiton Ltd,” according to MarketWatch.
The iShares MSCI Chile Capped ETF (NYSEArca: ECH) also rose more than 2% last week and is up 10.1% year-to-date.
Although Chile is viewed by some market observers as the most advanced and open South American economy and it is undeniably home to Latin America’s highest sovereign credit rating (AA-), there is also no denying the country’s dependence on copper exports as a driver of government revenue.
“Those negotiations have yet to begin and a time for them hasn’t been agreed upon, according to a spokesperson for BHP. It is unlikely they will begin before Monday, the spokesperson said,” notes MarketWatch.
For more information on Copper ETFs, visit our Copper category.