Copper Price Reaches Historical High

Copper prices have increased in the past four months since operators anticipated the risk of an interest rate increase, a factor that added to the uncertainty generated by a COVID-19 upsurge in China and the deceleration of industrial activities as the main factors affecting the demand.

Copper is regularly used in the energy and construction sectors. Using the London Metal Exchange as a reference point, prices went up by 1.5 percent, reaching US$9,549/t after a fall of 3.7 percent last Tuesday. From March 2020 to March 2022, its price doubled itself from less than US$5,000/t to a historical maximum of US$10.845/t. This week, copper prices dropped 13 percent from that record high.

Ole Hansen, Analyst, Saxo Bank, said that forecasts for the near future are difficult to predict, though prices will be backed up by the global energy transition, which will spur on copper demand toward the future.

Moreover, markets that remained closed in China restarted operation this Thursday, despite Beijing’s efforts to avoid the spread of COVID-19 and avoid a scenario like in Shanghai, where people have been in lockdown for over a month. As China is one of the main consumers of precious metals, the deterioration of the pandemic is one of the key factors keeping down prices, said Wenyu Yao, Analyst, ING.

The increase in copper costs, inflation and supply chain shortages affect companies developing infrastructure or driving digitalization. Copper is a material used for the manufacturing of cables required in the implementation of technology solutions, too.

Although gold, silver and lithium continue to be the most popular precious metals, the relevance of copper has grown in recent years. Some experts believe that copper is the "new oil" because it plays a critical role in driving industrial activities such as electric vehicle battery production and green infrastructure development, reported Goldman Sachs.

According to analysts, the demand for copper has been mainly benefited by the willingness of countries to comply with the Paris Agreement 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, the global copper consumption is 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.