Copper prices rise nearly 20% in one month, may pare gains

21 November 2016

Copper stood out among the hottest commodities in the past one month, as prices of the base metal surged nearly 20 per cent on hopes of improving demand from top consumer China and a steady decline in stocks at warehouses.

The rally was fuelled by optimism over robust demand from the US on expectation of increased infrastructure spending under president-elect Donald Trump. Trump has pledged to spend $1 trillion on infrastructure over the next 10 years, which has fuelled demand expectation.

On the Multi Commodity Exchange (MCX), prices of the commodity jumped from Rs 311 a kg on October 17 to Rs 368.70 a kg. However, market experts believe the rally is now overdone and there could be some correction by mid-December.

In the runup to the US presidential election, copper prices rose in anticipation of Hillary Clinton’s victory. In fact, copper prices surpassed the crucial $5000 per tonne psychological mark on the London Metal Exchange (LME) on November 7, a day prior to the election.

But the most surprising thing was that the metal moved 7 per cent higher in the international markets in a matter of just three days on November 8-10 despite the surprise victory for Donald Trump in the US presidential election. However, on MCX, copper prices surged 10 per cent to Rs 373.60 on November 11 from Rs 339.75 on November 8.

Prathamesh Mallya, senior research analyst, commodities & currencies, Angel Broking, said: “The rally is attributed to assurance by President-elect Trump that he would cut taxes and invest more in infrastructure, the core demand area for base metals. Another major development happened from China National Development and Reform Commission on November 11, which approved 85.6 billion yuan ($12.59 billion) for three railway projects, adding further to the demand outlook.”

Source – ET