As an asset class, economically sensitive commodities made for predictable victims of the US/China trade flap. That is certainly true of copper. Just look at the iPath Series B Bloomberg Copper Subindex Total Return ETF (JJC), which is saddled with a second-quarter loss of nearly 9%.
When it comes to copper’s recent price declines, bearish traders are not giving up just yet. In fact, data indicate shorts continue targeting the red metal for more downside.
Most copper today though is used in building construction, power generation and transmission, electronic product manufacturing, and the production of industrial machinery and transportation vehicles.
“On the London Metal Exchange (LME) three-month copper fell 11% from $6,443 a tonne at the start of May to a June 7 low of $5,740, its weakest price since the start of January,” according to mining.com. “It has clawed its way back to $5,920 but with bearish funds still massing on the short side it remains to be seen whether this is anything other than a pause for collective breath.”
Copper And China
Predictably, some of the data points concerning copper market observers come courtesy of China, the world’s second-largest economy and the biggest buyer of the red metal. Copper prices have been stuck in a rough patch this year, weakening on escalating tensions between the U.S. and China and softening global growth.
“Current market dynamics are a rerun of the price weakness in the third quarter of last year, with investors again focused on a deteriorating macroeconomic picture and the knock-on effect on metals demand,” reports Reuters. “And once again macro clouds are obscuring copper’s own resilient fundamentals in the form of weak mine production growth and supply chain disruption.”
JJC currently resides nearly 19% below its 52-week high, essentially putting the ETN in a bear market.
ETF investors can also gain exposure to the metals and mining space through miner-related ETFs, such as the SPDR Metals & Mining ETF (NYSEArca: XME), which is designed to track the broad metals and mining segment, and the Global X Copper Miners ETF (NYSEARCA: COPX), which takes a more focused approach to copper miners.
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