Analysts are predicting “Dr. Copper” will go on a sustained rally as the China-led global economy shows signs of climbing out of the coronavirus slump, though some long-term investors are adamant about staying away.
The benchmark copper price on the London Metal Exchange in early May hit a record high, at $10,460 a ton, and has since remained above $10,000. Its price had not been near that threshold for a decade; to reach it, it almost doubled in a year.
Market analysts are not surprised.
The leap “was expected,” said Takayuki Honma, chief economist at Sumitomo Corporation Global Research. “Sooner or later the price would have gone above $10,000.”
The impact of the pandemic has done little to soften demand, mainly due to China’s speedy recovery.
China is the world’s biggest copper buyer, consuming half of all global output. The country’s imports of unwrought copper and products rose 9.8% during the January-April period compared to a year earlier.
“There is almost no reason for copper prices to go down,” said Tetsu Emori, the CEO of Japanese investment advisory Emori Fund Management. Emori noted that copper is turning into an attractive commodity for investors, especially as major countries push for decarbonization, which is expected to boost demand for electric vehicles as well as wind and solar power generation stations.
Copper is mainly used to make electric cables and is indispensable to infrastructure builders. It earned its “Dr.” honorific with its uncanny ability to predict the health of the world economy.
China’s recovery has triggered a price jump for many commodities despite the pandemic. In just one year, iron ore prices jumped 78% and the benchmark price of lumber tripled. The price of other metals such as nickel and aluminum has also risen.
Many analysts say copper is unlikely to fall well below $8,000 a ton.
“Copper is now exploring a new price equilibrium point,” Honma said. The chief economist for Sumitomo Corporation Global Research is forecasting that “copper’s new price level will go up a notch.”
His bullish view is not groundless.
Some global banks are predicting a multi-year super-cycle for commodities, driven by shortages and strong demand from the renewable energy and electric vehicle sectors.
Goldman Sachs estimates that copper demand will grow nearly 600%, to 5.4 million tons, by 2030 due to the green transition. However, the market could face an 8.2 million ton supply gap by 2030.
All experts agreed that the energy transition trend, which serves major economies’ carbon neutralization targets, will benefit some metals, notably copper, nickel, and lithium.
Another poll at the seminar showed a dominating preference for copper as the most benefited metal in the next 6-12 months at 52.69% of all voted, followed by lithium at 16.13%, aluminum at 13.98%, silver at 8.6%, nickel at 5.38% and cobalt at only 3.23%.
Copper will be a dark horse, supported by infrastructure demand and the fast-growing new energy vehicle market, said Liu Shoujian, deputy chief executive officer of CCB International.
Sucden Financial’s Wilkes said, “copper demand from … the green economy is looking strong.”
A new energy vehicle needs 80 kg (176 lb) of copper compared with 23 kg in an internal combustion engine vehicle while charging, wiring and grid investment of renewable energy will also generate demand for copper, he added.
All information on this website is of a general nature. The information is not adapted to conditions that are specific to your person or entity. The information provided can not be considered as personal, professional or legal advice or investment advice to the user.
This website and all information is intended for educational purposes only and does not give financial advice. Signal Factory is not a service to provide legal and financial advice; any information provided here is only the personal opinion of the author (not advice or financial advice in any sense, and in the sense of any act, ordinance or law of any country) and must not be used for financial activities. Signal Factory does not offer, operate or provide financial, brokerage, commercial or investment services and is not a financial advisor. Rather, Signal Factory is an educational site and a platform for exchanging Forex information. Whenever information is disclosed, whether express or implied, about profit or revenue, it is not a guarantee. No method or trading system ensures that it will generate a profit, so always remember that trade can lead to a loss. Trading responsibility, whether resulting in profits or losses, is yours and you must agree not to hold Signal Factory or other information providers that are responsible in any way whatsoever. The use of the system means that the user accepts Disclaimer and Terms of Use.
Signal Factory is not represented as a registered investment consultant or brokerage dealer nor offers to buy or sell any of the financial instruments mentioned in the service offered.
While Signal Factory believes that the content provided is accurate, there are no explicit or implied warranties of accuracy. The information provided is believed to be reliable; Signal Factory does not guarantee the accuracy or completeness of the information provided. Third parties refer to Signal Factory to provide technology and information if a third party fails, and then there is a risk that the information may be delayed or not delivered at all.
All information and comments contained on this website, including but not limited to, opinions, analyzes, news, prices, research, and general, do not constitute investment advice or an invitation to buy or sell any type of instrument. Signal Factory assumes no responsibility for any loss or damage that may result, directly or indirectly, from the use or dependence on such information.
All information contained on this web site is a personal opinion or belief of the author. None of these data is a recommendation or financial advice in any sense, also within the meaning of any commercial act or law. Writers, publishers and affiliates of Signal Factory are not responsible for your trading in any way.
The information and opinions contained in the site are provided for information only and for educational reasons, should never be considered as direct or indirect advice to open a trading account and / or invest money in Forex trading with any Forex company . Signal Factory assumes no responsibility for any decisions taken by the user to create a merchant account with any of the brokers listed on this website. Anyone who decides to set up a merchant account or use the services, free of charge or paid, to any of the Forex companies mentioned on this website, bears full responsibility for their actions.
Any institution that offers a service and is listed on this website, including forex brokers, financial companies and other institutions, is present only for informational purposes. All ratings, ratings, banners, reviews, or other information found for any of the above-mentioned institutions are provided in a strictly objective manner and according to the best possible reflection of the materials on the official website of the company.
Forex trading is potentially high risk and may not be suitable for all investors. The high level of leverage can work both for and against merchants. Before each Forex investment, you should carefully consider your goals, past experience and risk level. The opinions and data contained on this site should not be considered as suggestions or advice for the sale or purchase of currency or other instruments. Past results do not show or guarantee future results.
Neither Signal Factory nor its affiliates ensure the accuracy of the content provided on this Site. You explicitly agree that viewing, visiting or using this website is at your own risk.
