Monday, March 23, 2009

Dr. Copper is in the news again

Copper prices are making news again today.

The recent runup in copper prices have made the industrial metal, nicknamed Dr. Copper for its blunt utility in guaging and forecasting economic activiy, front page news (well, at least in the Companies & Markets section of Financial Times) today.

Here are excerpts from FT's above the fold report:

"Copper stockpiling by a secretive Chinese state organisation has helped trigger an impressive rally of almost 35 per cent in the price of the metal this year.

Copper’s fortunes are closely tied to the industrial cycle so the price jump, bigger than that of gold, has grabbed attention outside the commodities market, with some questioning whether it could signal a turning point for economic growth..

...Industry reports point to buying by the Beijing’s State Reserves Bureau, which manages the country’s strategic stockpiles...

...David Wilson, metals analyst at Société Générale, said buying by the SRB has been the main driver behind rising copper prices. “Real demand has played little part in the current copper price rally and remains notably weak as global manufacturing activity continues to decline,” he said, summarising a view widely held in the copper market."

Of course, the very fact that rising copper prices are today's front page news will put many traders on alert for a corrective snapback or even a possible trend reversal. For now, the analysts quoted in the article seem to regard this as mainly a China restocking-driven event, and a "selling opportunity" for copper.

In our last detailed post on China and the commodity markets, we mentioned how the now-closely watched Baltic Dry Index has become an important guage of global economic activity.

There were also some questions (see comments in above post) about how long the recent rally in the BDI would last, and whether the bounce represented a real upturn in dry bulk shipping activity or just a periodic restocking of depressed commodity prices.

Here's a recent chart of the Baltic Dry Index versus copper prices, courtesy of

As you can see from the chart, copper seems to be jumping higher even as the BDI starts to turn down from its recent bounce.

Will copper prices continue to move higher for a time, or will the industrial metal's latest rally soon lose steam and start to emulate the latest topping action seen in the BDI? Let's keep an eye on both of these important markers for the global economy.

Related articles and posts:

1. Commodity currencies: follow that ship! - Finance Trends.

2. Copper leads rally for commodity markets -

3. Oil climbs, copper advances on dollar - Bloomberg.