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Copper prices underwent a stressful stretch for quite some time on a soft manufacturing sector in China, global growth worries, a stronger U.S. dollar and surplus supplies. The trouble deepened in 2015 as the greenback continued to gain strength on rising rate speculations in the country (read: Copper ETFs Tumble on China Growth Concerns ). However, the metal bucked the trend at the start of 2016 as the greenback softened slightly on tepid U.S. growth. Also, policy easing in China favored this struggling commodity. Notably, in a move to boost a waning economy, the People’s Bank of China (PBOC) cut reserve requirement ratio (Pending: RRR ) by 50 bps to 17% for all banks effective March 1 (read: ETFs to Gain from China’s Added Stimulus ). Now China matters the most for this metal as the country is the world’s biggest consumer of this industrial metal, accounting for roughly 40% of global copper demand. Also, the red metal has been witnessing shortage of supplies lately. In Chile – one of the key copper producing nations – copper output fell 14% year over year in January, marking the largest decline in a month in about five years. Not only this, production is expected to be on the subdued side even in February, per the sources . The reason for the output decline was worsening ore grade and reduced investment in the mining and power industries, per Reuters . All in all, analysts believe that ‘the commodities rout may be over’. While many are overseeing a likely decline in global output, the demand scenario is apparently firming. As per sources, China’s copper imports in February represented a 49% jump year over year. While this is clearly good news for those who are holding onto copper ETNs such as iPath Bloomberg Copper Subindex Total Return ETN (NYSEARCA: JJC ) — price of which has grown over 11.6% in the last one-month period – copper mining equities and the related ETFs became the biggest beneficiaries. Global X Copper Miners ETF (NYSEARCA: COPX ) – which tracks the Solactive Global Copper Miners Index – advanced over 44% in the above-mentioned period (as of March 10, 2016). Though a subtle turnaround can be noticed in the operating backdrop, copper exchange-traded products have a long way to go for solid improvement. As of now, ‘ Deutsche Bank analysts expect small surpluses this year and in the next, along with a deficit of 280,000 tons in 2018, 350,000 in 2019 and 280,000 in 2020’. So, investors can have a neutral outlook on copper-related exchange-traded products as indicated by a Zacks ETF Rank #3 (Hold) on JJC which has a High risk outlook. Link to the original article on Zacks.com Scalper1 News
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