In my Q3 report on the base metals sector on Barchart, I highlighted copper’s 3.70% rise in Q3 and 17.03% price increase over the first nine months of 2024. Nearby COMEX copper futures settled Q3 at $4.5530 per pound when I concluded:
Chinese demand, U.S. interest rates, the path of least resistance of the U.S. dollar, and other factors will determine if the bullish trend in base metals continues in Q4 and beyond. Copper is the sector’s leader, and the other metals could follow the red metal’s lead.
Copper fell to just above the $4 per pound level in November, which has become the base metals’ pivot point and critical support level.
Copper barely holds $4 during the recent correction
After the rally that took COMEX copper futures to a record high above the $5 per pound level in May 2024, the December contract corrected to below $4 in August. The red metal spent only three sessions probing below $4 before recovering to a lower $4.79 high on September 30.
The daily chart shows that December copper futures made a lower high and fell to a higher low at $4.0015 per pound, the November 14 low. While copper barely held the $4 level, the $3.90 to $4.00 area on the chart has become critical technical support.
Bullish and bearish factors for the copper market in late 2024
Bullish and bearish factors are pulling copper prices in opposite directions in late 2024. On the bullish side:
- Copper’s long-term decades long bullish trend remains firmly intact.
- Copper supplies are struggling to keep pace with the increasing global demand.
- Copper is a critical ingredient in alternative and renewable energy initiatives.
- Since 2001, every significant correction in the COMEX copper futures market and LME copper forwards market has been a buying opportunity.
On the bearish side:
- China is the world’s leading copper consumer, purchasing more than half the annual refined copper supplies. Chinese economic woes have weighed on worldwide copper demand.
- As the U.S. moves toward traditional energy production and consumption under the incoming Trump administration, the U.S. copper demand could be less than anticipated under the Biden administration.
- Copper’s trend since the May 2024 record high at nearly $5.20 per pound has been bearish with lower highs.
In late 2024, copper faces bullish and bearish factors that will likely persist into early 2025.
LME inventories have declined
Copper stocks on the London Metals Exchange, the world’s leading industrial market for the red nonferrous metal, have declined since the end of Q3. On September 30, 2024, 300,600 metric tons of copper were sitting in LME warehouses. As of November 29, the LME copper stocks stood at 271,000 metric tons, a 9.85% decline since September 30.
While inventory levels are not the only factor determining copper prices, the declining stock level can be a bullish factor. Meanwhile, copper’s forward curve is in contango, where prices for deferred delivery are higher than for nearby delivery.
COMEX copper’s forward curve displays steadily increasing deferred prices, a sign that the copper’s market sentiment remains bullish in late 2024.
Fundamentals and long-term technical factors support higher prices
One of the most significant factors supporting higher copper prices is bringing new copper production to market takes many years.
The chart shows that Chile remains the world’s leading copper-producing country.
The chart shows that Chilean copper output has been trending lower over the past years, increasing the need for production from other countries. One of the countries with significant copper reserves is the politically troubled DRC or Democratic Republic of Congo. While many Western mining companies have some interest in DRC copper production, corruption and political instability make extracting copper from the African country challenging.
The bottom line is that copper output will continue to struggle to keep pace with the increasing demand. The International Energy Agency believes that global copper mines will meet only 80% of the world’s copper requirements by 2030.
Meanwhile, the long-term technical trend remains bullish and compelling.
The quarterly copper futures chart dating back to 1959 shows that copper futures’ pre-2005 high was $1.6475, but copper has made high highs for over six decades. Since the turn of this century, copper has not traded below $1.26 per pound since 2008, under $2 per pound since 2020, and below $3 per pound since late 2020.
CPER is a copper ETF product that tracks the COMEX futures
The LME forwards and the COMEX copper futures are the most direct routes for copper exposure. The U.S. Copper ETF product (CPER) does an excellent job tracking the COMEX futures price action.
At $25.75 per share, CPER had nearly $156.2 million in assets under management. CPER trades an average of 127,483 shares daily and charges a 0.88% management fee.
December COME copper futures rose 22.16% from $3.9210 on August 7, 2024, to $4.7900 on September 30 and fell 16.46% to a $4.0015 low on November 14.
Over the same period, the CPER ETF rose 18.06% from $24.70 to $29.16 and declined by 12.41%, falling to $25.54 per share.
One drawback of CPER is that copper trades around the clock while the ETF is only available during U.S. stock market hours. However, CPER is a product that adds copper exposure to stock market portfolios. CPER reached an all-time high of $31.63 per share in May 2024, when copper futures rose to nearly $5.20 per pound.
The $4 level is copper’s critical technical support level. If the red metal can hold above $4, the odds favor higher highs in 2025. However, long-term technical support for copper’s bull market is at the 2020 $3.1335 low. Therefore, any long positions in copper require stops below $4 or a plan to add to long exposure down to the $3 level, leaving plenty of room to add if copper prices break the $4 low. I continue to favor long positions in copper in late 2025.
