Copper Price Falls Amid Nancy Pelosi’s Visit to Taiwan

Copper prices fell on Wednesday due to increasing tensions between the US and China, the main consumer of the metal, and added to the concern of rising interest rates hampering global economic activity. 

Three-month copper on the London Metal Exchange fell 0.5 percent to US$7,751/t, resulting in a drop for the third consecutive day.  "The mood has turned gloomy due to slowing manufacturing activity, COVID-19 shutdowns and the war in Ukraine, which is driving up energy prices and hurting the industry," said Daniel Briesemann, Analyst, Commerzbank.

As China is one of the main global consumers of precious metals, the deterioration of the pandemic is one of the key factors keeping down prices, said Wenyu Yao, Analyst, ING. Nonetheless, US House of Representatives Speaker Nancy Pelosi visited Taiwan and caused lingering tensions between the US and China to resurface. Pelosi is the first US House leader to visit the island since 1997 and stated that her visit honors the US commitment to democracy, whereas China, which claims Taiwan as its own, said that the visit was “extremely dangerous,” since the US had been “attempting to use Taiwan to contain China.”

The most-traded September copper contract on the Shanghai Futures Exchange lost 0.3 percent to US$8,872.39/t.

The relevance of copper has grown so much in recent years that it is now considered to be the "new oil" for rapidly developing industrial segments such as electric vehicle (EV) batteries and renewable energy infrastructure, reported Goldman Sachs. In an interview with MBN, Ralph Shearing, CEO, Altaley Mining, said base metals are experiencing something of a boom: “The long-term projections for copper are fantastic because of the global push for decarbonization and the reliance on copper as a key material. We see major opportunities.”

Nonetheless, due to market concerns, the International Copper Study Group (ICSG) updated its outlook for copper in 2022 and determined that global demand is expected to fall 1.9 percent. However, global production is expected to increase by 4.3 percent in 2022 and 3.6 percent in 2023, mainly due to new mines and a more manageable global pandemic. Consequently, the world copper market is expected to record a surplus of 142,000 tons in 2022 and 352,000 tons in 2023.

According to analysts, the demand for copper has been driven by the willingness of countries to comply with the Paris Agreements and replace fossil fuels with renewable energy. "Copper is truly perfect. It is essential to achieve a low-carbon world. I believe that the future of industry, society and our lives will largely depend on copper, as there is no other replacement for it. Perhaps silver could be an option but it is more expensive. As a result, copper will be the metal to lead the world's green transition," Steve Roberston, CEO, Infinitum Copper, told MBN.

According to an ING Economics report, global copper consumption stands at almost 29 million tons a year. In addition, the red metal’s demand experienced an annual growth rate of 1.97 percent from 2012 to 2019.