Dear Trader and Investor
Like a cloud hanging over the global economy, it has been well-documented that geopolitical and economic tensions and differences have led to a so-called “trade war” which as in turn lead to global instability and uncertainty. The tensions, primarily between the US and China have dented selected pockets of each of their economies but with China feeling a heavier part of the blow. These uncertainties have also put industrial metals under pressure, including Copper which is seen as a direct barometer of growth for the global economy. From it’s most recent multi-month peak of $3.22 in February 2018, the price has since retreated to $2.68 (it tested a low of 2.48 in early September 2019). While it is noted that price have recently become depressed due to the aforementioned factors, it should be noted that the commodity is due to experience a deficit going into 2021.
It should also be noted that Chinese Copper imports rose to an 8-month high in September. Arrivals of unwrought copper, including anode, refined and semi-finished copper products into China, stood at 445,000 tonnes last month, according to the General Administration of Customs. That was up from 404,000 tonnes in August but down 14.6% from a bumper 521,000 tonnes in September last year, which was the highest monthly total since March 2016.
Copper stocks in bonded warehouses in China slumped to 295,500 tonnes by September 30, the lowest since at least 2013, according to Refinitiv Eikon data, implying a tighter market as a crackdown on scrap imports boosted demand for other forms of copper.
With a deficit in the commodity being forecast, it is the perfect time to take a look at an ETF that allows market participants to take advantage of lower prices now which could potentially add alpha to a long term portfolio.
According to a Bloomberg article, renewable energy and China’s economic shift toward consumer-led growth will be major catalysts for a new wave of copper demand that’ll accelerate a shortage forecast to develop from 2019, according to BHP Billiton Ltd., the world’s largest mining company.
“The real spark, though, is the demand for renewables,” said Jacqui McGill, asset president for BHP’s Olympic Dam copper mine, the world’s fifth-largest deposit of the metal. “Regardless of where the energy’s coming from, it needs copper.”
The Global X Copper Miners ETF (COPX) provides investors access to a broad range of copper mining companies.
The Global X Copper Miners ETF (COPX) seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the Solactive Global Copper Miners Total Return Index.
Targeted Exposure: COPX is a targeted play on copper mining.
ETF Efficiency: In a single trade, COPX delivers efficient access to a basket of companies involved in the mining of copper.
Copper Technicals: Monthly (back to 1988). Shows price forming a large upward channel. At current levels, price setup is very similar to period Q4 2002 to Q3 2003 (green circled) where we saw a break above the downward trend (blue line) & push above the 50-month MA.
Accumulate at current levels: $17.90
Take Profit: $26.00 (Long Term Buy)
Please chat to the Unum Capital Trading Desk to take advantage of any trading opportunities.
All the best,
Unum Capital Trading Desk Analyst
Tel: 011 384 2923