A weak copper price takes its toll on UK base metals companies

Friday, 23rd August 2019 12:20 - by Rajan Dhall

Copper has taken a serious hit in recent weeks as the trade war hits the global economy and international trade. 

Manufacturing PMI's improved in Europe this week but the US number entered contractionary territory as the manufacturing PMI data printed below 50 for the first time in nearly a decade. 

On-warrant LME copper inventories, those not earmarked for delivery - stood at 298,900 tonnes, near their highest since April 2018 according to Reuters data

China has also commented saying that the slowdown has been caused by the trade war. China is the worlds biggest consumer of base metals and accounts to half of all global consumption. 

Looking at the chart now you can see the main trendline was broken around 4 weeks ago. Now the main hope for support comes from the consolidation low of $2.50/lb. Having said all of this if there are any bullish trade-related headlines we could see a push higher. Elsewhere, today we get the latest from Fed chairman Jerome Powell. If the USD drops off we could also see some support off the back on any weakness.

Below is the Kaz Mineral chart on the weekly timeframe and you can see that the share price is taking a beating. Today we hit the psychological 400 level but there seems no slowing the capitulation. 

Kaz has a great business model and could be one company to look out for when and if the copper price recovers. They have clients in China so any Chinese data would need to be looked at closely. 

From a chart perspective, 348.8 is a big level which acted as resistance in 2014. Although I feel the fundamental factors are a more pressing issue. 

The Writer's views are their own, not a representation of London South East's. No advice is inferred or given. If you require financial advice, please seek an Independent Financial Adviser.