As Trading Accelerates, Asia Leads The Way In Copper Consumption - Emerging Market Views

As Trading Accelerates, Asia Leads The Way In Copper Consumption

It is no secret that China holds a major presence within the global copper supply chain.  As the world’s largest copper consumer and one of the largest producers, China’s influence in global copper markets cannot go unnoticed.  This has been and continues to be evident within COMEX Copper Futures trading activity.  A recent surge in U.S. overnight trading activity may indicate the strength of this influence has only just begun.

Asia has become the leader in copper consumption, accounting for 70 percent of global refined copper usage

Copper Prices And Industrial Production

Prior to the global economy slowing down due to Covid-19, there was evidence that the copper futures price was poised to break out of its six-month slumber and head back towards $3/lb.

Chinese industrial production in 2019 had consistently been higher in 2018 throughout the year. However, the start of 2020 was quite the opposite. January and February figures were reported as a combined -13.5 percent from a year earlier.  This coincided with the onset of the Covid-19 pandemic, as well as a sharp decline in copper prices.

Asia Time Zone Trading Activity

While copper prices plummeted, participation during the Asia time zone accelerated.  Trading activity during the Asia time zone, defined as 8 a.m. to 8 p.m. in Singapore, increased 4 percent over the same time period in 2019 and rose 5 percent over Q4 2019. This also accounted for 34 percent of the total average monthly Copper Futures traded in Q1 2020. This trend has continued through April and May, with 36 percent of Copper Futures transacted overnight.

Asia has become the leader in copper consumption, accounting for 70 percent of global refined copper usage in 2018.

Despite the global copper supply chain being disrupted due to the Covid-19 pandemic, trading activity during Asia trading hours remains strong.  The return of higher copper prices may be difficult to predict, but the first signs of a trend could come during the U.S. overnight hours in futures markets

 

About Jon Lynch

Jon Lynch is Director of Metals Research and Product Development at CME Group, based in New York.