Investors looking for a commodity that is currently scorching hot do not have to look much further than copper. The iPath Bloomberg Copper Subindex Total Return ETN (NYSEArca: JJC) jumped nearly 8% last week.
The red metal, one of last year’s best-performing commodities, until recently, has been hampered by a strong dollar, among other factories. However, speculation about tighter supplies due to labor negotiations in some major copper-producing countries recently sent the industrial metal soaring.
“Workers at the Escondida copper mine in Chile, the world’s top producing mine by a country mile, fired an opening salvo in contract talks with part-owner and operator BHP that makes a quick resolution highly unlikely,” reports Frik Els for Mining.com.
Chile is the world’s largest copper-producing country. Prices of the red metal raced to the highest levels since January 2014 last week on news of the situation at the Escondida mine.
Rebuffing Copper Demand Questions
Previously, some observers pointed out that the escalating trade-war rhetoric may have contributed to protectionist trade policy fears. Traders may have been worried that the slower activity and impediments to free trade would lead to a weaker global economy, which would diminish demand for raw materials like copper. Furthermore, fears of an economic slowdown in China, the world’s largest commodity consumer, and recent data out of Europe and Japan have exacerbated concerns.
The situation in Chile bears watching for copper traders, bulls and bears alike.
“The 2017 strike at Escondida was the longest in Chile since the 74-day action at state-owned Codelco’s El Teniente mine in 1973, which took place shortly before the military coup that overthrew socialist President Salvador Allende,” according to Mining.com.
Workers at the Escondida mine are asking BHP to pay them a one-time bonus equal to 4% of the dividends the company paid to shareholders last year, or $34,000 per worker.
A near-term issue for copper is the ability of the Trump Administration to get its ambitious infrastructure efforts off the ground, something many market observers believe will not happen until next year.
For more information on Copper ETFs, visit our Copper category.