Copper Futures Rise on Strong Demand Outlook and Supply Disruptions

Copper futures rose on Friday on the view that steady global demand and disruptions in mine production would outweigh worries about the economic health of the US and Europe. Despite weak readings on US consumer confidence, industrial production, and New York-area business conditions, copper's rise was driven by a better-than-expected start to US corporate earnings season and supply disruptions in the world's largest copper producer, Chile. Analysts pointed to the bullish demand outlook and production challenges at large copper mines as constructive backdrops for base metal prices.

Key Takeaways:

• Copper futures rose 3.3 cents, or 0.8%, to settle at $4.413 a pound on the Comex division of the New York Mercantile Exchange, marking the first gain in three sessions.
• Market watchers pointed to signs of steady demand from China, the world's largest consumer of copper, and a widely held view that mine supply won't be able to meet rising demand.
• Analysts cited the influence of supply disruptions in Chile, where severe winter weather and worker protests have led to production shortfalls, as a supportive factor for copper prices.
• Copper is sensitive to the growth outlook due to its widespread uses in manufacturing and construction, driving traders' cautious approach amid US and euro-zone debt worries.
• The market's overall picture remains positive, with copper demand in China being "pretty decent" and the US economy expected to "muddle along".
• Analysts pointed to the constructive backdrop for base metal prices, including supply disruptions and a bullish demand outlook.

Statistics:

• Copper futures rose 3.3 cents, or 0.8%, to settle at $4.413 a pound.
• Market participants cited a better-than-expected start to US corporate earnings season as a supportive factor.
• Copper prices have been supported through much of the year by the widely held view that mine supply won't be able to meet rising demand.
• Chile, the world's largest copper producer, has faced production challenges due to severe winter weather and worker protests.

Sources:

• Dow Jones Commodities News via Comtex, Jul 15, 2011.
• TD Securities, Bart Melek, Head of Commodity Strategy.
• Lind-Waldock, Adam Klopfenstein, Senior Market Strategist.
• Standard Bank, Walter de Wet, Analyst.
• Dow Jones Newswires, Matt Day, Reporter.