Copper prices surged past a key psychological barrier on Friday, reaching $10,000 per tonne for the first time in over a month. This upswing comes amid growing optimism about Chinese stimulus measures and potential interest rate cuts in major economies.
China’s Stimulus Plan Fuels Copper Rally
Analysts at Citigroup predict copper prices could retest the $10,000 level due to investor confidence in upcoming policy support from China, the world’s biggest consumer of the metal. Expectations are high that China will announce additional economic stimulus at its Third Plenum meeting in mid-July. These measures are expected to target domestic property and power grid investments, which would directly boost copper demand.
“These additional measures specifically aimed at domestic property and grid investments are likely to provide significant support for copper prices in the near future,” Citi analysts said in a research note.
Temporary Dip, Long-Term Bullish Outlook
The recent price pullback in copper is attributed to weaker manufacturing data globally. However, Citi analysts believe this is a temporary setback. While cyclical demand may have softened slightly in June, overall copper consumption for the first half of 2024 remains strong, with a growth rate of around 4% year-over-year.
Looking ahead, the long-term outlook for copper is bullish. The potential for interest rate cuts in major economies like the United States could further propel copper prices. Federal Reserve Chair Jerome Powell’s recent comments suggesting inflation is on a downward trajectory sparked market confidence about the possibility of monetary easing. This, in turn, could boost economic activity and increase demand for copper, a key industrial metal used in everything from construction and power grids to electronics and renewable energy.
Copper Prices Poised to Break Records?
In afternoon trading on the Chicago Mercantile Exchange (CME), copper for September delivery surged over 3% to $4.67 per pound, translating to $10,300 per tonne. This marks the highest price point for copper in over a month. In May, copper hit a record high of over $11,000 per tonne. With Chinese stimulus and potential rate cuts on the horizon, copper prices could be poised to break new records in the coming months.
While China’s stimulus plans are a major driver of the current copper rally, other factors are also contributing to the uptrend. Concerns about long-term copper supply are simmering in the market. Aging mines are struggling to keep pace with rising demand, particularly for copper needed in the green energy transition. Disruptions due to geopolitical tensions or extreme weather events could further tighten supply and push prices even higher.
The biggest risk to the copper price rally is a significant slowdown in the global economy. If major economies like the United States or China experience a sharp economic downturn, it could dampen demand for industrial metals like copper. However, for now, the overall economic outlook remains cautiously optimistic, with most analysts expecting moderate growth to continue in the coming months.
Source: Mining.com
