Strongest Global Manufacturing Activity since 2008 Financial Crisis gives Commodities a boost in 2018....

COPPER the red metal used in wire and bullets manufacture is trending bullish after the metal markets priced – in data about a 94% decline in copper scrap imports as per Metalbulletin report released this week. It was rumoured last year that that China would introduce regulation that would ban the importation of scrap metal. This meant that that demand for fresh copper would rise sharply.

Metalbulletin reports that Beijing cut its quota for the first two batches of 2018 copper scrap imports to 136kt, down a whopping 94.3% compared to 2017. The market data provider said not only were far fewer refiners applying for licences, but those that did saw allocations drop more than 80% below last year's levels. Another indication of tight supply came a fortnight ago after China's copper smelters lowered their treatment and refining charges

Another indication of tight supply came last week after China's copper smelters lowered their treatment and refining charges ( TC/RCs) in the first quarter of 2018 by 8.4%. The 10-member China Smelters Purchase Team (CSPT) set the minimum level for treatment fees at $87 per tonne. Earlier China's Tongling Nonferrous Metals Group had agreed with number one listed copper producer Freeport-McMoRan to set the 2018 benchmark at $82.25 per tonne, an 11% drop from the 2017 benchmarks.

Copper gained 30% in 2017 as it continues to recover from six-year lows struck early last year and expectations are for a positive if more modest performance next year. Measured from its multi-year lows struck at the beginning of 2016, copper has gained more than 70% in value.

The red metal's run started on hopes (since dashed) of massive infrastructure investment in the US following the presidential election, but strikes in Q1, which at one point saw nearly a tenth of global production go offline, really set the tone for the year. By mid-year the rally was flagging, but talk of a Chinese ban on scrap imports saw the price take off again.

Copper closed Friday last week’s trading session at $7,188/ton on the London Metal Exchange - LME

Despite the rally, commodities prices are though also benefiting from less-friendly supply constraints, notably the reduction in oil supply orchestrated by Saudi Arabia and Russia. In copper, investors worry that wage negotiations in Chile, the world’s largest producer of the red metal, could disrupt mining activity. And freezing weather in the U.S., the world’s top producer of agricultural commodities, is helping to increase the price of wheat and other grains.

On the flip side, the rally could sow the seeds of its own destruction as producers such as shale oil companies bringing extra supplies to cash-in higher prices.

“Rising U.S. production on the back of higher prices could keep prices range-bound even though demand for oil is rising,” said Michael McDonough, chief economist at Bloomberg Economics.