M6 BARRON’S March 16, 2020
metric tonne on March 12 and Comex fu-
tures prices settling at $2.464 a pound on
March 13.
As of Friday, the drop this year of about
12% for copper futures compares with a
Dow Industrials decline of nearly 19%.
“The bet is that China will prop up its
economy and copper will benefit,” says
Marnie Owen, global head of technical
analysis at Informa Global Markets, add-
ing that China announced stimulus mea-
sures last month that supported the metal,
and central banks such as the U.S. Federal
Reserve cut interest rates to help counter
Covid-19 risks to the economy.
China, meanwhile, has been recovering.
“Within China, there is a cautious desire to
get back to business as usual, but the big-
ger question would be whether demand
from other countries for Chinese exports
can keep up to pace, as it’s their turn now
to scramble to cope with the outbreak,”
says Keith Tan, senior managing director
of steel and scrap at S&P Global Platts.
New cases in China have slowed, but
they’re climbing in other parts of the world.
On March 13, China reported 11 new con-
firmed cases, while Italy’s were at 2,651.
Ed Egilinsky, managing director and
head of alternative investments at Direx-
ion, says overall copper demand and prices
could continue to decrease in the short
term if the coronavirus spread worsens in
North America and Europe.
If there’s a lasting impact beyond the
second quarter, copper could drop to the
$2.20 range, he says. That would be the
lowest since October 2016.
For now, Caruso believes there is “no
fundamental or technical indicator sug-
gesting we should be buying and holding
copper,” and there’s no indication that the
market has seen the lows for copper.
At the same time, Caruso is “hesitantly
bearish,” as a rise in global monetary and
fiscal stimulus may contribute to a “reac-
celeration of inflationary pressures later
this year, and that could reignite the prices
of hard assets.”B
COMMODITIES
Copper Prices Fare Better
Than Oil, Other Assets
C
opper, known as a leading indi-
cator of economic activity, has
suffered along with many other
commodities on the heels of the
spread of the coronavirus. Futures prices
were trading well below a January peak but
faring better than other markets, like oil.
The moves for copper are particularly
important for those who look to the metal
for hints on where the economy and stock
market are headed.
Copper is called Dr. Copper “because it
carries a Ph.D. in economics,” says John
Caruso, senior asset manager at RJO Fu-
tures.
It “tends to front run the direction of
equity markets and is usually a good indi-
cator of the health of the business cycle,” he
says. So far, it has “held up much better
than other economically sensitive markets.”
Corrosion-resistant copper’s many uses
include electronics, plumbing, and electri-
cal equipment.
The S&P GSCI Copper index fell by
1.3% over the first seven trading days in
March, compared with a decline of 11.4%
for the S&P GSCI, a broad-based commod-
ities- and energy-heavy index, according to
Fiona Boal, head of commodities and real
assets at S&P Dow Jones Indices.
Boal points out that “copper was one of
the first market casualties of the Covid-19
outbreak, given that demand for the metal
is strongly linked to the Chinese manufac-
turing sector,” with the S&P GSCI Copper
index down more than 11% from its most
recent high in January.
“If Covid-19 is responsible for a short
and sharp hit to global economic activity
and not a protected global economic slow-
down...then the negative blow to copper
demand is likely to be relatively short-
lived,” says Boal.
Copper prices on the London Metal
Exchange and Comex touched their lowest
levels in more than three years, with LME
data showing cash copper at $5,386 per
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