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The copper market, which has always been considered the thermometer of the global economy, is going through an unprecedented period of uncertainty. On Thursday, 8 August 2024, copper prices with a September expiry date attempted a modest rally, but failed to regain the psychological $9,000/mt threshold on the London LME exchange.
The metal price lost more than 23% of its value from the all-time high of $11,100/mt recorded on 20 May 2024, mainly due to a ‘short squeeze’ that occurred mainly in the US markets.
From Dream to Reality: Exaggerated Predictions and the Harsh Truth
The initial enthusiasm that led some analysts to predict a bright future for copper, with prices as high as $15,000 per tonne by the beginning of next year and as high as $40,000 in the near future, now seems to have faded.
These predictions, often fuelled by an optimistic view of increased demand from emerging sectors such as data centres for artificial intelligence and military spending, as well as the energy transition, were short-lived.
However, the reality of the market looks very different. Before the mining industry can hope to achieve a sort of copper ‘nirvana’, the next few years may prove to be extremely difficult.
The fate of copper depends almost entirely on China, the world’s largest consumer of the red metal.
Meanwhile, 3-month LME copper prices stood at $8,903/mt (15:11 Italian time), up 1.07% from the previous day’s close. It is not excluded, that in the short term, LME copper prices may generate a momentary rebound at least up to the first fundamental resistances in the $9,000/mt and $9,200/mt areas.
LME Copper – 3 month $/ton daily
China at the Centre of the Crisis: Construction Market and Overcapacity
The fate of copper is closely linked to China’s construction sector and its smelting plants, which account for more than half of global production. In particular, the crisis in the Chinese real estate market and persistent overcapacity could lead to a further decline in copper prices.
Although discussions about possible production cuts initially ignited the market, production from Chinese plants will remain high, with large inventories in storage that could drive down prices for China’s copper exports, dragging down prices in global markets.
Outlook for the Future: Rebound or Further Descent?
Nevertheless, base metals, including copper, could receive a boost towards the end of the year, thanks to an increase in Chinese government investment and infrastructure spending expected in the final months of 2024.
However, analysts predict that by the end of next year, copper prices will be below current levels, thus debunking predictions of an increase to $15,000 per tonne.
A Market Poised Between Hope and Crisis
In summary, the future of copper remains uncertain, oscillating between the ambitions of a new wave of global demand and the pressures arising from China’s domestic issues. For now, it seems that hopes of a copper boom have to contend with the harsh reality of a market heavily influenced by China’s economic dynamics.
For anyone operating in this sector, the coming years will require constant attention and a remarkable ability to adapt to the rapid developments in the global market. For this reason, it will be essential to closely monitor price developments, relying on a serious and reliable platform such as Commodity Evolution.
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