What Is Driving the Copper Rally and How Sustainable Is It?

As discussed in "Impact of Global Economic Recovery and Chinese Growth on Copper," the recent gains in copper prices have been underpinned by the broader global recovery, as well as the continued fiscal growth of the world’s number one copper consumer; China.

By Shaun Connell:Copper prices have recently hit 3-month lows on the London Metal Exchange, partly because of renewed fears of economic problems around the world, most notably in China and Europe. Chinese copper imports have fallen in recent months as well, only after jumping substantially for the few months beforehand, as reported by the Business Insider.

THE Wall Street Journal reports that some high-flying commodities have gone into retreat in recent weeks:Cotton has pulled back 17% from the all-time record set in early March, and sugar is down 34% from its multidecade high in February. Lead and zinc have tumbled in recent weeks after shooting up in the second half of 2010. Copper has shed 6% this year.

All eyes in the commodity markets are still on the dollar today, following on from the release of the Federal Open Market Committee (FOMC) minutes yesterday, which has continued to fuel speculation that further quantitative easing will be forthcoming when they next meet in early November. With this weakness in the greenback, USD denominated commodities are trading higher across the board today, with copper touching a 2-year high on the London Metal Exchange (LME), boosted further following strong Chinese import data overnight.

LONDON (Reuters) - Global copper market heavyweights are drafting proposals to stop metal from getting stuck in queues leaving storage facilities, as such delays would threaten the credibility of the London Metal Exchange's (LME) flagship product, industry sources said. The issue has arisen at a delicate moment, as the LME lines up a potential $2 billion sale to another exchange. Exchange regulations allow companies operating warehouses in the global network registered by the LME to release only a fraction of their inventories each day - much less than is regularly taken in for storage. ...

By Bob Johnson: On Wednesday, May 30, LME Spot Copper closed at $7645 a tonne. This figures out to $3.40/lb. This is the year-to-date low, and is 26% below the 2011 high. Whether "Dr. Copper" truly has a PhD in economics and can predict the future of the economy is open to debate. Whether it is a leading indicator or a reflection of the market, one thing is certain, this does not bode well for copper miners.

Here is an interesting story from a reader about huge stockpiles of metals building up, right here in the US, because of limited demand from manufacturers. Dear Mish,