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Copper Price 2022 Year-End Review
Copper reached its highest level ever early in 2022, but couldn't hang on to that elevated price. Here's what moved the metal throughout the year.
Click here to read the previous copper price update.
Copper prices were under pressure in 2022, trending downwards during the second half of the year.
Even though the red metal hit its highest level on record in March, trading above US$10,400 per tonne, it was unable to retain that price. Falling on softer demand in top producer China, the second half of the year proved challenging for the base metal.
With 2022 rapidly drawing to a close, here the Investing News Network (INN) takes a look at copper trends for the year, including how prices performed and what analysts said about developments in the space each quarter. Read on to learn more.
Copper price in Q1: Prices hit all-time high
Copper kicked off 2022 trading at US$9,720.50 and was able to remain above the US$9,500 threshold for the entire quarter.
In late February, Russia’s invasion of Ukraine raised uncertainty in global markets, including copper. Russia is the seventh largest copper country in the world by production.
“The biggest surprise has been that copper prices have not changed much in Q1, while many other commodities have shot higher in response to the Russian invasion of Ukraine,” Dan Smith of AMT, a London Metal Exchange metals dealer, told INN back in March. “Copper rose by 6 percent, but this is compared to a 24 percent jump in the aluminum price.”
Copper’s highest point of the quarter came on March 4, when the base metal was sitting at US$10,674.
Copper's price performance year-to-date.
Chart via the London Metal Exchange.
In Q1, top consumer China imposed new lockdown measures to contain rising COVID-19 cases. This created significant headwinds for demand, as construction activity slowed and consumer spending was hampered, Smith said.
Looking over to supply, restriction measures related to COVID-19 limited Q1 mine production in a number of countries.
“Gradually rising smelting activity in China, thanks to fading power rationing, and normalizing output in Latin America, should boost global supply and control price growth,” FocusEconomics analysts said at the end of Q1.
Despite the increased volatility seen since January, copper prices rose almost 7 percent in the first quarter and ended the three month period trading at US$10,375.
Copper price in Q2: Disappointing recovery in China
Despite coming off a strong first quarter of the year, copper prices fell sharply in Q2.
The highest point of the second quarter came early in April, when copper was changing hands for US$10,469. But after that, the trend was only downward, with prices losing more than US$2,000 by the end of the three month period.
Speaking with INN about copper’s performance in Q2, Karen Norton of Refinitiv said the price correction that continued into the third quarter was sharper than anticipated. “Inventories are low and the price collapse has been exacerbated by speculative activity,” she said back in June. “Even so, the zero-COVID policy in China and subsequent disappointing recovery to date, along with growing fears for a global recession, are combining to undermine sentiment.”
Similarly, Robert Edwards of CRU Group said he was not expecting such a sharp correction in prices, as the copper market's micro-indicators were still relatively positive. “There were low exchange inventories (and) US/European demand remaining relatively robust; China's physical market was weak, but not as bad as macro data was suggesting,” he said.
Commenting on the supply/demand balance for copper in Q2, Norton told INN that the net impact of weaker-than-anticipated demand this year looked set to be offset by a supply picture that was also coming up slightly short of expectations.
“This will leave the market in what is still a relatively modest surplus against the backdrop of low inventories,” Norton said at the end of Q2. “The prospect of a larger surplus next year though in a recessionary environment would likely weigh on sentiment.”
All in all, prices declined over 20 percent over the second quarter and ended the period at US$8,258.
Copper price in Q3: Market volatility dominates
As the year progressed, copper continued to be under pressure, with prices unable to rebound to the levels seen earlier.
Speaking with INN about the major trends seen in the copper space in the third quarter, Norton said she anticipated further price weakness. That was mainly due to broadly pessimistic demand expectations that dominated the sector amid growing recession fears and measures taken to tackle rampant inflation.
“Despite this, prices found a floor just below US$7,000 early in the period, managing to stabilize to some extent as supply growth also remained lackluster to offset,” she said. “Market watchers may also be wary of sharply lower prices acting as a disincentive for new projects at a time when they should be committed if the energy transition is to keep anywhere close to the stated timelines.”
In terms of demand, Edwards of CRU Group told INN in Q3 that he was still concerned about Chinese residential real estate as a demand driver. The Asian country is the world's top copper consumer.
“But copper demand is benefiting from end uses related to the green energy transition, such as electric vehicles and renewables, along with exports of wire and cable and some copper semi-fabricated products,” he said.
Similarly, Norton didn't believe there would be a significant pickup in China's demand in the final quarter.
“The new energy sector is a bright spot, but accounts for a much smaller proportion of demand than the real estate sector, which remains weak and an area of continued concern,” she said.
Looking over to the supply side of the story, disruptions in major copper-producing countries were under the spotlight in the third quarter. “South America — Chile and Peru — remain the primary supply risk going into 2023, plus the inevitable uncertainty around the startup of some large-scale projects,” Edwards said.
Chile remained the top copper-producing country in 2021, with a total output of 5.6 million metric tons, according to the US Geological Survey. Peru came in second again, with production reaching 2.2 million metric tons.
All in all, prices ended the three month period down, trading at US$7,560 — a decline of more than 6 percent for the quarter.
Copper price in Q4: Uncertainty remains
During Q4, copper prices began to slowly increase, breaking the US$8,000 mark and hovering around that level in December.
Copper kicked off the fourth quarter trading at US$7,508, with supply disruptions in top-producing countries Peru and Chile making news headlines to begin the last three month period of the year.
China’s COVID-19 measures continued to put pressure on copper demand, as did the uncertainty of what may happen with the real estate sector. Around 23 percent of China’s copper end use comes from civil and building construction.
“While in the short-term, macro headwinds and recession fears are likely to put downward pressure on the copper market, the long-term fundamentals are looking more supportive amid low visible stocks, supply disruptions and expectations of a China recovery,” Ewa Manthey of ING said.
Another trend seen in the fourth quarter so far has been the increase in copper premiums in Europe on the back of expectations for higher demand, plus increases in energy and transport costs.
The world’s biggest miner, Chile's Codelco, agreed a record benchmark premium for European buyers at $234 per tonne for 2023, up 83 percent from the 2022 level. Meanwhile, Aurubis, Europe's biggest copper smelter, will charge its European customers a premium of $228 per tonne above the benchmark price in 2023.
Looking at 2023, investment bank Goldman Sachs (NYSE:GS) is forecasting that copper prices will increase to record levels in the next 12 months, predicting “a huge deficit” in copper supply paired with robust demand for the red metal.
On December 5, copper was changing hands for US$8,391, down 13.67 percent year-to-date.
Don’t forget to follow us @INN_Resource for real-time news updates!
Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
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Priscila is originally from Buenos Aires, Argentina, where she earned a BA in Communications at Universidad de San Andres. She moved to Vancouver for the first time in 2010 and fell in love with the city. A few years after she went to London, UK, to study a MA in Journalism at Kingston University and came back in 2016. She enjoys reading, drinking coffee and travelling.
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