• Copper futures traded at a range of 4.3665 to a high of 4.4155, adding 1.09% on the day. 
  • Demand rose on supply concerns after Chile’s JX Nippon’s workers went on strike. 
  • By 2040, the annual demand for copper is expected to rise to 0.7 million tons from 0.4 million tons recorded in 2020.

Copper futures added 1.05% as of 2:34 am on August 12, 2021, from the previous day’s close. It traded at a range of 4.3665 to a high of 4.4155 (+1.09%) on the day. 

Rising copper futures prices

Copper futures hit a high of $4.776 per pound in May 2021 due to increased manufacturing activity in the US. At the time, the manufacturing PMI stood at 61.2%. In July 2021, there was a slight expansion in the factory activity, with the PMI declining to 59.5 (-1.1%) from 60.6 recorded in June 2021. While it represented a decline, it still indicated expansion as it was above the 50.0 threshold level.   

Supply disruptions

Demand for the commodity increased on supply disruption after Chile’s JX Nippon’s workers went on strike. It followed a botched contract talk mediated by the government.

Copper production is still ongoing at the mine located in Caserones-Chile, with JX optimistic that it will minimize output delays. Production at the mines was projected to increase by 136,000 tons (+11%) in the fiscal year April 2021-March 2022. 

Still in Chile, BHP is on the verge of securing a long-term wage deal with its workers at the Escondida Mine- the world’s largest copper mine. The union had threatened to strike while demanding better remuneration for workers. Investors were upbeat about the deal, hiking copper futures prices. 

As of August 11, 2021, BHP stock had gained 0.45% to close trading at $77.87. The YTD analysis shows that BHP has added 15.62%, indicating a strong upsurge in sales and production throughout the year. 

In Mongolia, Rio Tinto (RIO) suffered a setback after experts noted that mismanagement had cost the company $1.4 billion at the copper mine. Rio, the world’s second-biggest copper miner, had blamed production hitches at Mongolia on unfavorable rock situation, but this call was negated. 

RIO stock lost 0.97% on August 11, 2021, to close trading at $86.10. Pre-market trading as of 4:20 am GMT showed an 8.39% decline to $78.88. A decrease in the price may erase YTD gains made by the share price as it grew 14.64% and 40.34% in a year. 

Copper demand

Analysts are optimistic about the rising demand for copper alongside aluminum and zinc to help in limiting the impact of global warming. In a report by Wood McKenzie, the mainstreaming of solar energy in the US will help improve copper demand. The commodity is used in the manufacture of transmission cables (both high and low voltage). 

By 2040, annual demand is expected to rise to 0.7 million tons from 0.4 million tons recorded in 2020 (+75%). Capping global warming by at least 2 degrees would see the consumption levels of copper soar to 1.3 million tons by 2040 (according to the report).

Zinc and aluminum are also crucial commodities used in the solar energy sector, and their price will be affected by the increased uptake of renewable energy sources. 

Technical analysis 

The copper futures prices were range-bound from June 22, 2021, to July 28, 2021. The price rose to a maximum of 4.385 at the time, characterized by declining volatility and an increase in buying action. Afterward, a pullback was formed, giving way to an upward breakout towards the resistance line. We are likely to see an uptrend towards 4.4255 after crossing 4.4015.

2-Copper futures technical chart

There is still low volatility, with the 14-day ATR at 0.1114. However, it could change since the 14-day RSI at 51.79 is rising, indicating an increase in buying. A reversal can push the price below 4.385 and towards 3.5344 on the downside.