Copper Prices Reach Three-Month High Amid Strong China Data and Lower Stocks
Copper prices surged to a three-month high on Friday, marking the third consecutive week of growth. The positive momentum was driven by better-than-expected data from China, the world’s top consumer of copper. Additionally, the rising demand for the metal was supported by tighter supply, declining exchange inventories, and a weaker US dollar.
By 1059 GMT, three-month copper on the London Metal Exchange had risen by 0.9% to $8,543.5 per metric ton, reaching as high as $8,564, its peak since September 1. The resistance posed by the 200-day moving average at $8,445 was convincingly broken.
China’s manufacturing industry unexpectedly expanded in November, according to a private Caixin survey. This growth was attributed to a rise in orders, despite a fall in the official November Purchasing Managers’ Index (PMI). Nitesh Shah at WisdomTree noted, Although the official PMI data points to Chinese industry still contracting, the Caixin data at above 50 indicates that the stimulus that the Chinese government have been offering is working.
The decline in the value of the US dollar further supported copper and other dollar-priced metals. This was driven by easing inflation and anticipation surrounding a speech by US Federal Reserve Chair Jerome Powell later in the day. Softer data regarding inflation in the United States and the eurozone has strengthened expectations that both central banks may halt their interest rate hikes sooner than anticipated, leading traders to place bets on earlier cuts in 2022.
According to ING commodities strategist Ewa Manthey, Looking forward to 2024, copper prices will be supported amid weaker U.S. dollar on the back of U.S. Fed monetary policy easing.
Several factors have contributed to concerns about tighter copper supply. Issues surrounding supply from Panama and signs of reduced availability of copper concentrate have been notable drivers behind the recent growth in copper prices. Warehouse data from the Shanghai Futures Exchange indicated a 27% decrease in copper inventories this week. Similarly, LME-registered warehouses reported a decline in daily on-warrant stocks.
While copper experienced substantial gains, other metals on the London Metal Exchange displayed mixed performances. Aluminium eased by 0.2% to $2,188 per ton, zinc rose by 0.2% to $2,479.5, lead increased by 0.6% to $2,136, tin climbed by 1.6% to $23,615, and nickel added 0.9% to reach $16,795.
As copper prices reached a three-month high, investors and market participants will continue to closely monitor China’s economic data, supply factors, and the direction of central bank policies in both the United States and the eurozone.
In conclusion, the surge in copper prices to a three-month high can be attributed to strong data from China, tightening supply, declining inventories, and a weaker US dollar. As the world’s top consumer of copper, China’s unexpected expansion in its manufacturing industry served as a significant catalyst for the metal’s growth. With concerns over tighter supply, reduced availability of copper concentrate, and indications of a shift in monetary policy by major central banks, the future trajectory of copper prices remains uncertain. Market participants and investors will closely analyze economic data and policy decisions to evaluate the sustainability of copper’s growth trend.
