China’s COVID zero about-face is beginning to have its much-awaited impact on commodity markets, with critical battery metal copper currently attracting its highest price since June.
As the world’s largest consuming nation of most commodities, an uptick in economic and industrial activity was always expected to impact metal prices.
Analysts are predicting a fast rebound across all sectors in China as its vast economy shifts back into drive.
With the reopening continuing, the cash copper price on the London Metal Exchange reached US$8,766 per tonne on Monday – rising to almost US$9,000/t by Wednesday.
This week’s price rebound follows a bottom of US$8,209/t earlier in the month. However, the price is still below the almost US$11,000/t peak in March last year.
LME inventory is currently at 84,800t – a far cry from 380,000t in mid-2018.
According to the International Copper Study Group (ICSG), copper stocks held across major exchanges LME, COMEX and SHFE was around 191,951t at last count in November 2022.
For several years, analysts have been predicting the metal’s price would run due to its necessity in technologies underpinning the world’s transition to net zero, particularly, electric vehicles and renewable energies.
Copper is so critical to the world’s decarbonisation that it has been touted as the “new oil”.
However, external factors such as COVID-19 and, prior to that, the US-China trade war stand-off have stunted the metal’s expected growth.
Market factors
The same dynamics are driving this latest copper rebound with demand mounting for the critical metal amid eroding supplies.
Latest data from the ICSG shows production was down 6% in the world’s largest copper mining country Chile – impacting global supplies.
The ICSG also noted COVID-19 restrictions and infection rates had constrained mined output across a number of countries at the beginning of 2022 – with China’s COVID zero policy dampening both mining and consumption.
Meanwhile, the average LME cash price for the year through to November 2022 was US$8,834.2/t – down more than 5% on the 2021 full year average.
In its most recent forecast, the ICSG expected a 328,000t global copper deficit for 2022.
Copper price forecasts
When looking at where the copper price will head, Goldman Sachs predicted in December that it will average US$9,750/t in 2023, and rise further to US$12,000/t in 2024.
Joining the bullish prediction is the world’s largest copper miner Glencore, which says the commodity is facing a cumulative global deficit through to 2030.
“There’s a huge deficit coming in copper, and as much as people write about it, the price is not yet reflecting it,” Glencore chief executive officer Gary Nagle warned.
