By Nicholas Earl
Copper prices are set to boom this year, analysts have predicted, as China’s reopening looks set to drastically boost demand for the metal.
Forecasts have become increasingly optimistic, as the orange metal’s recent surge in price has been driven by an expected rebound of the Chinese economy, moving away from its strict zero-Covid-19 policy, and expectations of less aggressive fiscal policy from the US Federal Reserve.
Copper finished trading last week at $,9,305 per tonne for its three-month trading price on the London Metal Exchange – down 0.19 per cent on the previous day, when it hit its six-month high of over $9,500 per tonne. Last summer, copper was trading at around $7,000 per tonne.
London-listed Chilean copper miner Antofagasta also posted a bullish outlook for the year last week, as it also expected demand to jump on China’s reopening.
Boris Mikanikrezai, head of metals research and strategy at Fastmarkets, told City A.M. that in 2023, “China and the Fed will become macro tailwinds,” in contrast to being hurdles for any potential price rallies last year. “These factors together are expected to contribute to firmer copper prices.”
China is a significant player in the copper market, accounting for 42 per cent of the global refined output produced worldwide, and 55 per cent of its overall consumption.
Mikanikrezai noted that to ramp up economic growth, the Chinese government is “inclined to provide policy support to its property sector, which could further boost demand for copper.”
This outlook was shared by Ole Hansen, Saxo Bank’s head of commodity strategy, who argued that China’s reopening was the “main driver impacting the commodity sector.”
“With activity in China unlikely to pick up in earnest until after the Lunar New Year holiday, the prospect of a lull in activity could be the trigger for a pause in the current rally – especially across industrial metals where copper has started the year with an 11 per cent gain – before gathering fresh momentum and strength towards the end of the current quarter,” Hansen said in a research note.
Alongside recent headwinds, Mikanikrezai expects copper to reap the benefits from the gradual global shift to net zero as the metal is a core component in the manufacturing of electric vehicle batteries and wind turbines.
“In the coming years, copper demand from the green economy is expected to be boosted by initiatives such as tax incentives and regulations that encourage the use of clean energy, thereby benefiting copper demand,” Mikanikrezai said.
Fastmarkets is predicting a 24 per cent growth in green demand for copper versus just a 1.8 per cent growth in brown demand – demand from the construction and fossil fuel industries – in the copper market this year.
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