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The Copper Journal Report: Timing and the Metals Markets

Making your way through the metals markets is about timing, but also navigating through the wind and the waves of market movements, both big and small. For week ending Jan. 25, 2019.

We seem to be motivated by music these days.

Take a listen to Good Timin’ by Jimmy Jones (1960), as he tells us all we need to know about timing things. Be careful though, the tune will be with you for the rest of the day.

Our old friend, Mr. William Shakespeare, also had some thoughts on the subject of timing when, in Julius Ceasar, he quoted Brutus saying:

There is a tide in the affairs of men.

Which, taken at the flood, leads on to fortune;

Omitted, all the voyage of their life

Is bound in shallows and in miseries.

And so it is with our markets. It’s about timing, but also navigating through the wind and the waves of market movements, both big and small.

That said, for the most part, markets – metals, energy, and equities all continue improving, as if to advise us, "don’t worry, these issues – Brexit, government shutdowns, trade disputes, political gobbldey gook, and slower global growth, will pass, and tomorrow will be a better day."

OK, I’ll take your word for it.

In the meantime, a few observations: The nearby back in copper widened to 3.95¢ on Wednesday, but finished the week at - 90 points. And contrary to what we should expect, open interest in the Spot month has been rising, rather than falling, with just a few days left till the January contract expires. Also note that Comex copper inventories have fallen about 16,400 mt since the year began.

Nonferrous and precious metal markets continue inching up, but the caution here is that silver and gold have moved into ‘very overbought territory’, thereby signaling that a correction may be expected at any time.

On a much more macro basis, it has been said that we ‘adapt, or perish’. This applies not only to mankind, but to companies, and entire industries.

As relates to metals, the copper industry went through an evolution during the 1970’s, whereby buying and selling shifted from a ‘Producer Price’ structure, to an open market, exchange based mechanism.

That was a very lengthy, difficult, and painful process for all involved, on many different levels.

The aluminum industry went through the tough process during the 1980’s, with a similar outcome as copper.

Today, the steel industry, the largest of all metal markets in terms of volume, is facing a similar evolution. This will also take a long time to change, and it will be painful.

In the end, though, the industry – producers, consumers, merchants, brokers, bankers, scrap dealers and processors, will all be in a better position to manage their price risk exposure.

To this point, we are also evolving, as many people have asked us for a long time to include steel prices in The Copper Journal.

So, with this issue, the CME Midwest Domestic Hot-Rolled Coil Steel (CRU) Index Futures Contract, and the CME U.S. Midwest Busheling Ferrous Scrap (AMM) Futures Contract are now included.

The CME HRC contract is 20 short tons, while the CME BUS contract is 20 gross tons, with both being financially settled.

There is a lot more to know about these contracts, so when you have some time, visit the CME website to become better acquainted with them.

And if you want to learn more about hedging, or how managing price risk can help your business, just give us a call, at 631-824-6486.

 Download this week's report below:

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