Copper prices have held their ground recently even as oil has tumbled, but some investors say worries over the pace of global growth may soon put an end to the metal's outperformance. Copper for November delivery has risen more than 3% this month, compared to a nearly 12% drop in prices for Brent crude, the global oil benchmark. The divergence is notable because many investors trade oil and copper in the same basket of commodities, with a larger share devoted to crude. Some investors use copper prices as a barometer for the global economy because the metal is a key component in everything from iPhones to refrigerators and is widely used in construction. There are several reasons why prices for the two commodities have parted ways, analysts said. Idiosyncratic factors have swung crude prices in the last few months, including rising production and a deteriorating demand outlook. Prices also rose amid expectations that the U.S. would reinstate sanctions on Iran, only to drop when the White House granted waivers to eight countries, allowing them to keep buying Iranian oil and easing fears of a supply crunch. The recent stability marks a reversal for copper, which fell more than 20% over the summer, when fears of a global trade war between the U.S. and China intensified. China accounts for nearly half of global demand for the metal. That decline may have been overdone, leaving copper more stable than other commodities now, said Michael Widmer, a commodities strategist at Bank of America Merrill Lynch. “Copper has already priced in an awful lot and demand is not necessarily bad,” he said. In recent days, prices for the metal have been helped by hopes of a thaw in relations between the U.S. and China as talks between top officials resumed ahead of a meeting between the countries’ leaders later this month. Still, it’s unlikely copper prices will continue going their own way if trade tensions or a shift toward tighter monetary policy weigh on growth outside the U.S. Recent signs have been worrying to some investors. China’s bank lending and consumer spending slowed in October. Germany’s economy shrank for the first time in 3½ years in the third quarter, while Japan’s economy contracted at an annualized pace of 1.2%. In general, “2019 may not be the strongest year for commodities,” Mr. Widmer said. Are you worried about this year's drop in copper prices? Let the author know your thoughts at ira.iosebashvili@wsj.com. Emailed comments may be edited before publication in future newsletters, and please make sure to include your name and location. |