Even though the global copper market has experienced a bearish streak over the past months, with price downturns of up to 10 percent, some analysts believe that the red metal will soon see cost increases. Nevertheless, experts argue that this volatility would continue this year and the prices average could fall below current levels in 2023.
According to Bloomberg, copper has been traded at over US$8,000/t in 2022, above the 10-year average of US$6,750/t. Furthermore, copper prices reached their maximum historical price at the beginning of 2022, with the figure standing at US$10,845/t due to the Russian invasion of Ukraine. The war caused investors to fret about a possible break in the Russian supply of the metal, as it is the eighth largest copper-producing country in the world with over 810,000t/y.
In early November 2022, the copper price reached a five-month peak of US$8,600/t but retreated because of investor fears of a decrease in the Chinese demand for copper, as they thought increasing COVID-19 cases might curb the country’s economic growth. However, some analysts believe that copper prices have some maneuvering room to grow.
According to analysts, the positive scenario for the metal prices is driven by China’s easing of COVID-19 measures and its support for real estate companies. China has just started a large vaccination campaign for the elderly, which might see the country further relax its zero-COVID-19 policy, characterized by large-scale shutdowns. Additionally, last week, the government relaxed rules for developers selling shares as well as issued measures aimed at ramping up liquidity in the real estate sector, one of the largest sectors regarding copper demand. “The driving force today is the higher expectations for economic recovery in China. With China reopening seemingly a matter of time, the focus switched to economic development,” said financial services platform Marex.
Another industry that has boosted copper demand is the manufacturing sector. In September 2022, factory activity returned to a growth trend after months of contractions. The increase was driven by an increase in the demand for Chinese products. “The Chinese market has found support from improving demand, which contrasts with poor demand in non-Chinese markets and would keep the import arbitrage window open,” a China-based metals trader told Reuters in an interview.
However, copper volatility is expected to continue due to China’s COVID-19 issues, its domestic stimuli and tight physical supplies, said Chaos Ternary Research Institute. According to experts, average copper prices in 2023 will be below current levels at over US$7,660/t, with the lowest price at US$$5,430/t and the highest at US$8,775/t.