Copper and Nickel Prices Reach Yearly High

Expectations for Economic Recovery on Vaccine News
Industrial Metal Prices Rally
2X Guri Futures ETN Yields 111% Profit from Low Point

[Asia Economy Reporter Minji Lee] Although the spread of the novel coronavirus infection (COVID-19) continues, the price rally of industrial metals is ongoing as vaccine development accelerates. This is analyzed to be due to growing expectations of economic recovery centered on China, the largest consumer of industrial metals.

According to the New York Commodity Exchange (COMEX) on the 23rd, the December copper futures price on the 20th was $3.28 per pound, up about 51.5% from the year's low of $2.10. The spot price of copper traded on the London Metal Exchange (LME) recorded $7,718.5 per ton at the closing price on the same day, setting a new yearly high. This represents a sharp rise of 67.1% compared to the year's low of $4,617.5.

Nickel prices are also maintaining an upward trend. On the LME, nickel futures prices reached $16,157.5 per ton on the 20th, marking a yearly high. In addition, prices of other industrial metals such as zinc and lead rose more than 10% compared to the average prices in the third quarter.

The sustained strength in industrial metal prices is due to growing expectations of economic recovery centered on China. Recently, following the announcement of Phase 3 vaccine clinical trial results, news has emerged that vaccinations could be administered within the year, reflecting expectations of economic recovery in major countries such as the United States and Europe.

In the case of copper, inventories in China, which accounts for 50% of total demand, are continuously decreasing, raising expectations for additional demand. Inventories fell by 4.8% compared to the previous week. Supply, which stimulates prices, is also delayed, supporting the short-term strength of industrial metal prices. Researcher Jonghyung Lee of Kiwoom Securities said, "Copper reached its highest level in 29 months, influenced by both demand and supply," adding, "Other industrial metals like zinc were affected by the temporary suspension of mining operations due to a mine collapse in South Africa."

Unlike gold and silver derivatives, which have relatively low interest in the stock market, exchange-traded funds (ETFs) and exchange-traded notes (ETNs) investing in these commodities are showing rising returns. The 'KODEX Copper Futures' recorded a yearly high on the day, achieving a 55% return since March 19 (3,980 KRW). The ETN leverage product 'Shinhan Leverage Copper Futures ETN' posted a 111% return during the same period. The 'Daishin Leverage Nickel Futures ETN' also achieved a 92% return.

Experts predict further gains in industrial metals through next year. Researcher Byungjin Hwang of NH Investment & Securities said, "Global economic reflation expectations and optimism about the Chinese economy, along with the yuan's strength, have already become positive factors for the outlook of industrial metals," adding, "Next year, expansionary fiscal policies in advanced markets such as the US and Europe will also support positive investment sentiment in the industrial metals sector." Furthermore, it is expected that if the Joe Biden administration takes office, eco-friendly infrastructure policies will further increase demand for renewables such as solar power, wind power, and electric vehicles, centered on copper and nickel.