Pressure on Copper Prices Continues

Tuesday January 6, 2015, 3:40pm PST
By Teresa Matich+ - Exclusive to Copper Investing News

After hitting four-and-a-half year lows on Monday, copper wasn’t faring much better on Tuesday. While gold seemed to be on a tear, hitting about $1,218 per ounce, and silver experienced a modest increase to $16.57 per ounce, copper still sat around $2.76 per pound.

A number of factors have been weighing on the red metal as of late. To be sure, a stronger US dollar is one of them.

As pointed out in an article for Barron’s, copper is usually denominated in US dollars, so the metal gets more expensive for those buying in other currencies when the greenback rises. Barron’s notes that on Friday, the dollar hit its highest level in over 10 years, based on The Wall Street Journal’s Dollar Index. Worries over weak oil prices, Greek debt and a possible exit for the country from the Eurozone haven’t been helping either.

Of course, signs of slower economic growth have also created concern over demand for the metal, which is used in electronics, houses and other industrial applications. According to The Wall Street Journal, a number of analysts have pointed to weak manufacturing data from China and the US in the last week of December as stoking worries over slowing economic growth.

“Demand, I would say generally, has not been as robust as a lot of people would have liked to have seen,” said Alex Terentiew, a research analyst at Raymond James in Toronto. He noted that the broader industrial complex has seen softening demand, and as many investors will know, oil, iron ore and metallurgical coal all saw weakening prices last year. “That’s feeding through to the copper market as well,” he said.

For his part, Stefan Ioannou of Haywood Securities sees room for the copper price to come down even further, since at $2.75, even higher-cost producers are still able to hold on. “At $2.75, they’re still arguably making a little bit of money,” he said, “they’re not shutting down yet.”

Some have blamed the price squeeze on a surplus for the red metal, and Ioannou agrees that there is still a “supply overhang” on the market currently. However, he believes that with prices not high enough to spark new development in the copper space, the tables will have to turn eventually. Until then, it appears to be a waiting game for the copper price to improve.

“It is definitely slipping here,” Ioannou said. “We’re getting into not all-time lows, but definitely lows of recent memory.”

Stocks round-up

On a brighter note, not all was lost on the copper side of things, as a number of copper companies actually saw slight gains. Here are a few copper stocks that were up Tuesday on the market:

Almaden Minerals (TSX:AMM) — up 3.48 percent to $1.19.
Nevada Copper (TSX:NCU) — up 3.12 percent to $1.65.
First Quantum Minerals (TSX:FM) — up 2.65 percent to $16.27.
PolyMet Mining (TSX:POM,NYSEMKT:PLM) — up 2.38 percent to $1.29.
Excelsior Mining (TSXV:MIN) — representing the TSX Venture, Excelsior was up 2.04 percent to $0.25.

Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article.