Key Points:
- Copper prices hit a 14-month high due to optimism over China’s economic recovery.
- A weaker US dollar boosts the appeal of dollar-denominated commodities like copper.
- China’s manufacturing sector shows signs of revitalisation, hinting at increased copper demand.
- Due to various challenges, Chinese smelters may reduce copper production by 5-10%.
On Tuesday, April 3 2024, copper prices soared to a 14-month high in Asian trading sessions, propelled by burgeoning optimism over China’s economic recovery and potential production adjustments by Chinese refiners. This uptick was notably reflected in the London Metal Exchange, where three-month futures of copper experienced a 0.5% increase, reaching an impressive $9,347.50 per ton. Similarly, in the US, one-month futures saw an identical percentage rise, climbing to $4.2328 per pound. This marks the highest copper prices since January 2023, underscoring a significant recovery phase in the global commodities market.
Copper Prices Rise as US Dollar Hits 5-Month Low.
A weakening US dollar, which had retreated from its five-month peak earlier in the week, further supported the resurgence in copper prices. A softer dollar generally enhances the appeal of dollar-denominated commodities like copper, making them more affordable to investors holding other currencies. This dynamic contributed to copper’s appeal, aiding in the price escalation observed in early April.
China’s Factory Revival Signals Copper Demand Spike
March 2024 saw China’s manufacturing sector exhibit revitalisation, with improving factory activities buoyed by positive purchasing managers index readings. This rejuvenation in the manufacturing domain, particularly among Chinese factories—a pivotal copper demand source—signifies potential upticks in future copper requirements. Despite a rise in Chinese copper inventories in 2024, heightened demand is expected to bolster copper imports, aligning with the broader economic recovery narrative.
Chinese Smelters May Slash Copper Production by 10%
Amid these optimistic demand signals, there’s contemplation among Chinese smelters regarding copper output reductions, ranging from 5% to 10%. This contemplation stems from challenges such as production disruptions and diminished processing fees, as reported by Bloomberg. Although it remains uncertain if these cuts will materialise, such developments could further constrict global copper supplies.
ANZ: Copper Mine Cutbacks to Strain Global Supply
ANZ analysts have remarked on the significant tightening of the copper concentrate market, attributing it to output curtailments from copper mines. This scenario has created significant challenges. Additionally, declining treatment charges have contributed to these difficulties. Consequently, Chinese smelters, which account for over half of the world’s refined copper production, are now considering production cutbacks. ANZ analysts observed that the copper concentrate market has significantly tightened due to cutbacks in output from copper mines.
Consequently, Chinese smelters, who account for over half of the world’s refined copper production, are contemplating output reductions as treatment charges plummeted close to zero. Such adjustments are expected to impact global copper supplies. This is happening amidst an improving demand landscape in China. Consequently, it sets the stage for a potentially bullish trajectory. As a result, copper prices may rise in the foreseeable future.
