Copper Prices Again Witnessed a Declining Trend Due to Hawkish Stance of the U.S. Federal Reserve

Copper prices reached a seven-week high of USD 9,200 per tonne (USD 4.12 per pound), following a week of robust increases but this may be the best it gets for the bellwether metal this year.

According to a Focus economics analysis, ten analysts raised their expectations for the copper price in Q4 2023 in a poll of more than two dozen investment banks and market research firms at the end of March.

However, the consensus projection for average copper prices in the fourth quarter is around USD 8,575 per tonne, with the lowest prediction at around USD 6,500 (Euromonitor) and the highest at a more encouraging USD 10,050 (Commerzbank).

The copper price is inextricably linked to the Chinese economy, with the country accounting for more than half of global consumption of the orange metal. 40% of it ends up in China's construction industry.

Despite a favourable demand outlook due to the green energy transition, historically low inventories, and supply growth uncertainties, difficulties in China's construction sector have kept medium-term copper price forecasts restrained.

Imports are Decreasing

Data released on Thursday revealed an unexpected increase in Chinese exports after a five-month slump. However, other indicators, such as factory gate prices falling at the highest rate since June 2020, contradict the statistics.

While China's imports of coal and iron ore were high, customs figures show a drop in copper purchases: concentrate imports decreased 7% year on year, while unwrought copper imports fell nearly 20%.

At the present rate, refined copper imports will dip below 5 million tonnes this year, down from 5.9 million in 2022, while concentrate shipments would fall far short of last year's 25.3 million tonnes.

Because of its widespread use in industry, transportation, construction, and power grids, copper prices are vulnerable to general economic trends.

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In a new research, New York-based Neuberger Berman discusses "phantom tailwinds" from China (and Europe) for the global economy, implying that investor optimism about China's potential to drive global development and alleviate a US or worldwide recession is largely mistaken.

According to the investment business, recent Chinese stimulus in the form of Total Social Financing is the weakest in 20 years relative to the size of the economy. Furthermore, the government's GDP growth target for 2023 is the lowest since 1976, indicating that Beijing has little appetite for budgetary support for growth.

According to Neuberger, the fall in input product imports, as well as the lack of strength in the currencies of commodity-rich trading partners such as Australia, Canada, New Zealand, and Brazil, are further indicators of economic weakness.

Copper Price Trend

Asia Pacific

Copper prices in China have been hampered in the last quarter. As the government lifted the covid limits, the manufacturers began mass production. Nonetheless, as a result of the downstream industries' wait-and-see attitude, the metal's price trends have dwindled. Because of the coming recession fears and central banks throughout the world tightening their monetary policies to contain inflation, Indian copper prices followed a similar path.

Europe

The rise in interest rates in the United States, combined with China's reduced output as a result of the Covid-19 restrictions, fueled speculation about a global recession. As a result, metals prices are falling in the midst of weak demand from other sectors.

North America

Metal prices have recently fallen in the US domestic market as recession fears loom. Furthermore, the drop in demand was triggered by fears of a recession, which would result in lower pricing.

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As per Procurement Resource, following a week of strong advancements, copper prices reached a seven-week high of USD 9,200 per tonne (USD 4.12 per pound). In a poll of more than two dozen investment banks and market research organisations at the end of March, 10 analysts boosted their forecasts for the copper price in Q4 2023, according to a Focus economics report.

However, the consensus forecast for average copper prices in the fourth quarter is around USD 8,575 per tonne, with the lowest forecast being around USD 6,500 (Euromonitor) and the maximum forecast being a more promising USD 10,050 (Commerzbank).