Copper Rallies on Chinese Output, Strengthening Demand

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Copper futures recorded a stellar weekly gain as the industrial metal benefited from advancing industrial production in the world’s second-largest economy, as well as surging demand. The red metal also found support in supply disruptions in Chile and Peru, but analysts believe that investor sentiment is beginning to deteriorate because a lot of these developments may have already been priced in by the market. 

September copper futures rose $0.0565, or 2.01%, to $2.8635 per pound on Friday on the New York Mercantile Exchange. Copper prices ended the week 2.62% higher, bringing the year-to-date rally to a little more than 2.3%. 

According to the National Bureau of Statistics (NBS), industrial production climbed at an annualized rate of 4.8% in July, unchanged from the previous month. The reading fell slightly short of the market forecast of 5.1%. This is the fourth consecutive month of rising industrial output after cratering by in the first quarter of 2020. 

Beijing reported increased production for machinery, communications, general equipment, ferrous metals, and chemicals. The only drop in production was for transport equipment, slipping 1.4%. 

The latest General Administration of Customs data found that China’s unwrought copper imports surged 81% year-over-year in July to 762,211 tons. Copper concentrate imports advanced 12% last month to 1.795 million tons. In the first seven months of 2020, China has imported 21.7 million tons, leaving the country on track to pass last year’s record of 22 million tons. 

Copper inventories in warehouses monitored by the Shanghai Futures Exchange have close to doubled this month to 172,051 tons. But market observers warn that the third quarter is historically a bearish period for Chinese copper demand. 

Prices have come under pressure by escalating US-China tensions, and all eyes will be on the virtual meeting between officials in Washington and Beijing. Vice Premier Liu He will be meeting with Trade Secretary Steven Mnuchin and Trade Representative Robert Lighthizer to discuss the state of the phase one trade agreement. 

In other metal commodities, December gold futures tumbled $16.70, or 0.8475%, to $1,953.70 per ounce. September silver futures shed $1.173, or 4.23%, to $26.545 per ounce. September platinum futures fell $22.20, or 2.26%, to $960.80 an ounce. September palladium futures cratered $76.70, or 3.46%, to $2,140.10 an ounce. 

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