The price of copper, a widely used metal in power, construction, and transportation sectors, dipped slightly on Friday as the US dollar strengthened, making commodities more expensive for buyers using other currencies.
However, copper still achieved a modest gain of 2.8% this year, partly reversing a decline of 13.9% in 2022. Healthy demand from China, the world’s top metals consumer, and hopes for US interest rate cuts as inflation subsides drove this trend.
Some investors were optimistic about the potential for further stimulus in China and the global demand for copper as a key component of the green transition, while others were more cautious about the outlook for 2024. Others were more cautious due to weak economic growth and the risk of recessions in some countries.
“It would seem the global economy is due to slow down even further in the first half of 2024 which means the bullish story for metals that some are putting out may have to wait a while,” said Malcolm Freeman, CEO at Kingdom Futures, a brokerage firm.
China’s Demand
According to a report by Mining.com, China’s copper demand climbed 3.2% this year after the country dropped its zero-Covid policy, which allowed more economic activity and mobility, according to analysts at China Futures, another brokerage firm.
The annual growth will moderate to 2.8% in 2024, as the housing sector remains sluggish but partly offset by increasing investment in the power grid, strong solar and wind power sectors, and the development of electric vehicles, they added.
China also boosted its copper imports this year, taking advantage of lower prices and building up its strategic reserves. In November, China imported 484,000 metric tons of copper, up 12.4% from the same month last year, according to customs data.
Supply Tightness
A tighter supply outlook of copper concentrate, the raw material for refined copper, amid mine closures and disruptions in major producing countries such as Chile, Peru, and Indonesia, drove the market.
China’s top copper smelters lowered their first-quarter guidance for copper charges, the fees they charge miners for processing concentrate, to $55 per ton, the lowest level since 2011, reflecting the market’s current state.
Lower charges indicate lower availability of concentrate and higher costs for smelters.
The long-term trend of decarbonization and electrification, as the world strives to achieve the goals of the Paris Agreement on climate change, is expected to benefit copper despite the short-term challenges.
Copper is essential for renewable energy sources, energy storage, electric vehicles, smart grids, and other technologies that can reduce greenhouse gas emissions and foster a sustainable, clean-energy future.
According to the International Copper Association, the global copper demand could increase by up to 50% by 2030, driven by these sectors.
Copper, often touted as the ‘holy grail’ of energy, may yet prove its worth in the years to come.
