Home / Commodities / Commodity News / Copper at risk of further downside on Chinese woes

Copper at risk of further downside on Chinese woes

Copper prices are likely to move lower before stabilising due to worries about a slowdown in top metals consumer China and other major economies.

But analysts say the long-term outlook is still strong due to lack of investment in new mines and demand generated by the green energy transition.
Many analysts have trimmed their price estimates as copper slid by nearly a fifth over about two months after touching a record high of $10,845 a tonne in early March.

Much of the buying that lifted copper since hitting a seven-month low on May 12 was by investors cancelling their bearish positions, but that trend is set to lose steam, analysts said.

London Metal Exchange benchmark copper CMCU3 was down 0.8% at $9,472 a tonne on Tuesday morning.

“It’s not going to be a smooth ride for copper and base metals. Investors are still a bit cautious and may sell the rallies,” said Xiao Fu, head of commodity market strategy at Bank of China International.

“The consensus would be that China will recover in the second half, but in terms of timing and degree, that’s still uncertain.”

An ailing property sector and slower economic growth was already a worry before China imposed strict COVID-19 lockdown restrictions.

“China’s copper demand is facing headwinds. Key copper end-use sectors such as autos and construction struggled for growth throughout Q1 2022,” analyst David Wilson at BNP Paribas said in a note.

Residential property starts have contracted by 25% this year, he said.

Wilson expects copper to end the year at $8,700, down 8.2% from the current price while Citi sees it falling to $8,500 within three months.

In the longer term, many investors are bullish about copper due to weaker investment in mining projects and expected rising demand for copper to help cut carbon emissions, such as in electric vehicles.

Wood Mackenzie has forecasted a 10-year supply gap of up to five million tonnes of copper to 2031.

“The duration and depth of the current downturn are unknown, but we believe the subsequent recovery in most commodities will be very strong given a lack of supply growth,” Christopher LaFemina at Jefferies said in a note.
Source: Reuters (Reporting by Eric Onstad; editing by Jason Neely)

Recent Videos

Hellenic Shipping News Worldwide Online Daily Newspaper on Hellenic and International Shipping