by Raul de Frutos on DECEMBER 12, 2016

Copper prices rose nearly 20% in November, a stellar rally that caught many by surprise… except us, of course.

Following this sharp move, there were concerns about the pace of the metal’s gains. However, so far, the metal has shown resilience to giving those gains back. Indeed, it looks like copper still has fuel in the tank to move higher.

Investors are pouring money into base metals as Chinese demand from infrastructure and construction continues to beat expectations. Momentum in copper is also being driven by hopes that U.S. President-elect Donald Trump will spend more on infrastructure. Stronger Eurozone and U.S. manufacturing PMIs also contributed support. Domestic PMI rose to 53.2 in November, the highest reading in five months and well above market expectations.

On November 30, OPEC agreed to curb its production to support falling oil prices. The news pushed crude oil prices above $50, providing support to commodity markets and metal prices.

The International Copper Study Group (ICSG) estimates that global mined production will increase by 4% this year. But next year the ICSG is forecasting zero growth in mine supply. Even though copper markets are still in surplus, investors know that copper is a very slow business in terms of new project development. Consequently, even if prices continue to rise enough to incentivizee new developments, it will take a long time for that new supply to hit the market.

Despite analysts’ skepticism about copper’s rally, prices still have room on the upside. Given the ongoing price strength across the industrial metal complex, we see no reason not to remain bullish on copper.