Before we get into the meat of this article there is something going on in copper that may interest folks on the long side. All day today, as U.S. equities were getting whacked the world's third or fourth largest producer (it depends on the kind of month Glencore is having) the third or fourth largest producer, Freeport-McMoRan (FCX), was trading in the green while U.S. copper futures were only off a few pennies as the dollar showed impressive strength and the 10-year note showed impressive weakness, two occurrences that one might infer to be negative to the red one, but no. FCX is a pretty good leading/coincident indicator of sophisticated speculator sentiment in copper.
And now as I type the front futures are up 0.0305 at 4.4130.
Just to be clear, we are intermediate-term bearish on the metal, thinking we will trade under $4.00 before the real fun begins on the long side but in the immediate-term it appears long ain't wrong. Something's up.
And from Mining.com, the headline story, December 24:
The copper price catapulted to a record high of $4.762 per pound ($10,476 a tonne) in 2021 as top consumer China staged an economic rebound and exchange inventories hit a 47-year low.
Disruptions in top producers Chile and Peru and the Biden Administration’s infrastructure plan also helped to build momentum for the bellwether metal, crucial in the global push for a greener economy.
The bullish sentiment was defined by Goldman Sachs, which called the metal the “new oil” in a May report.
Meanwhile, the biggest copper mining project in decades began production in May. In a turbulent year, here are the top copper stories of 2021.
#1 ChileThe world’s top producer decided to rewrite its Pinochet-era constitution that underpinned nearly three decades of mining growth in the South American nation.
A new taxes and royalties bill already approved by the Senate could, if unaltered, put at risk some 1 million tonnes of annual output, representing around 4% of global copper supply.
The legislation, which faces multiple procedural hurdles, would impose a royalty as high as 75% on sales of copper to pay for social programs.
Companies including BHP say the bill as it stands — with sales tax brackets that increase as metal prices rise — would derail investments.
With the election of leftist president Gabriel Boric in December, the bill could become law.
Boric, a 35-year-old former law student, vowed during his campaign to bury Chile’s “neo liberal” economic model. Although he later softened his message, he has kept the idea of giving the State a more active role in the sector, as well as higher royalties.
During his victory speech, Boric reiterated he would oppose mining initiatives that “destroy” the environment, particularly the controversial $2.5 billion Dominga copper and iron ore project that was approved this year.
“Destroying the world is destroying ourselves. We do not want more ‘sacrifice zones’, we do not want projects that destroy our country, that destroy communities and we exemplify this in a case that has been symbolic: No to Dominga,” he said.
Chile’s copper output sank to a seven-month low in September, on the back of labour disruptions, including an almost one-month strike at Codelco’s Andina mine near the capital Santiago.
#2 PeruNeighboring country Peru, the second-largest producer of copper in the world also saw the rise of a new left-wing leader.
In June, socialist Pedro Castillo won a long and tense presidential election battle.
Castillo says he wants to increase spending on healthcare and education by raising the funds from mining tax hikes, redistributing profits to Andean communities like those around the huge Las Bambas project, owned by China’s MMG.
The promises are now being tested, with protests and blockades at Las Bambas in the country’s south straining government negotiators, a reflection of wider tensions between indigenous communities and the key mining sector....
....MUCH MORE
U.S. copper is up again, +12.95 cents (+2.73%) at 4.8780 and I think we will be getting off the train for a bit. Between a Barron's story on Friday and ZeroHedge relaying a call for a double over the weekend the inherent leverage in the futures bears watching.
