Palisade Research - Tue, Nov 21, 2017

Chinese Investors Making Big Bets On Copper

article title text over a picture of an open pit copper mine

Chinese traders are increasingly driving the global price of copper.

And it is absolutely showing.

Because of this, the Chicago Mercantile Exchange, also known as the CME, is planning something big in the next couple days.

And that is to launch a futures contract for copper against spot copper prices in Shanghai.

The CME said that these contracts will be the first of their kind for hedging exposure to Chinese copper.

Otherwise said, this is giving China more control of copper prices.

Why does this matter?

That Chinese demand for all metals is insatiable.

Dane Davis, commodities research analyst over at Barclays, recently said something important.

"We're seeing the center of gravity in the metals pricing shift to China."

And according to Reuters, China accounts for almost half the world's copper demand.

Half.

This is why China has been hurrying to further develop their base-metal trading markets.

It's no surprise that the Chinese want to price copper in their own currency and trade copper future contracts on their own exchanges.

But this shouldn't be something shocking.

Actually, it's been pretty expected. . .

Why?

Because the supply of copper is dropping.

After years of low prices, what did you expect?

Yet now, finally, 2017 has seen the metals revival.

During the last 15 months the price of copper is up over 45%.

15-month line chart of per pound copper prices

As supplies continue to fall and demand from China grows - prices will soar.

No wonder the Chinese traders are betting big on copper's future.

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