What factors impact the copper price today? Our quick look at the market covers the dynamics between supply, demand and more.
- How to Invest in Copper
- 7 Basic Copper Facts for Investors
- 5 Major Copper Uses
- A Look at Historical Copper Prices
- The Copper Price Today: A Brief Overview
- LME Copper vs. COMEX Copper
- What are Copper Futures?
- 3 Copper ETFs and ETNs
- Top Copper Production by Country
- 5 Top Copper Reserves by Country
- Economics of the Copper Scrap Market
- Is Peak Copper Coming?
- Types of Copper Deposits in the World
- Copper Ore Types: Sulfides vs. Oxides
- Copper Refining: From Ore to Market
From wiring and plumbing to electric vehicles and electronics, base metal copper is key for a range of important applications in various industries.
In fact, the metal has earned the moniker “Dr. Copper” because its widespread use makes it a valuable indicator for global economic health. Knowing the factors that move the copper price today is therefore helpful for investors who are focused on the bigger picture.
Overall, 2020 has been a good year for copper, even though the copper price took a COVID-19-induced dive in the early spring — as was the case with most other commodities.
What should investors know when tracking the copper price today? Read on to find out.
Copper price today: Supply and demand
Chile is the world’s number one copper producer, with Peru and China coming in a distant second and third. China takes the lead on the demand side, accounting for over 40 percent of global demand. A spike in demand from China led to a jump in copper prices from 2003 to 2008, and copper rose again from late 2008 to 2011 after dropping drastically in the wake of the 2008 global financial crisis.
The following three factors have major impacts on supply and demand dynamics for copper.
1. Chinese demand — Chinese demand continues to play a role in the copper price today, and a “Chinese buying spree” bolstered the metal’s price throughout the second half of 2020.
Moving forward, it appears that demand from the Asian nation could continue to play a significant role in driving copper prices. George Daniel, a fund manager at Red Kite Capital Management, has said that the copper market today is similar to that of the early 2000s in that China’s hunger for the red metal could push the market into a state of undersupply.
“This time it’s been different because China has been sucking everything up,” Daniel told Bloomberg. “It feels like we’re getting into a period where there’s just no copper around.”
China’s copper imports rose to their second highest level on record in September 2020. Analysts at ANZ Bank (ASX:ANZ) told clients, “Strong industrial and construction activity continued to drive primary copper demand. China’s plan to build strategic reserves is likely to keep imports resilient as well.”
There are a number of drivers of Chinese copper demand, including the country’s Made in China 2025 program, which entails upgrading many factories into “smart factories” that will require more copper. Other drivers include demand for higher-efficiency vehicles, the Internet of Things and green manufacturing. China’s demand for copper in these sectors is expected to grow from “0.87 kilograms of copper per kilowatt (kg/kw) in 2015 to 1.56 kg/kw in 2025.”
2. Mine production — Mine disruptions are another important influence on the copper price today. Typically mining disruptions for copper are attributed to permitting or labor disputes, such as when BHP’s (NYSE:BHP,ASX:BHP,LSE:BHP) Escondida mine in Chile faced a labor strike early in 2017 that halted production for several weeks, or when Freeport-McMoran’s (NYSE:FCX) Grasberg mine in Indonesia faced disruptions during a mining permit dispute with Indonesia’s government.
However, in 2020 the main cause for mine disruptions is linked to the coronavirus pandemic. According to GlobalData, the 10 top copper producers saw their collective output decline by 3.7 percent year-on-year in Q2. While China has suffered from setbacks at its copper mines, operations in Chile, Peru and Mexico have experienced the worst of it as COVID-19 lockdowns had to be put in place.
3. Inventory fluctuations — Rising copper inventories can weigh down the price of the metal, while falling inventories can boost the copper price. Declining inventories over the past few years have helped lift copper prices, with Shanghai Futures Exchange (ShFE) and London Metal Exchange (LME) inventories both experiencing significant drops. The declines in have sparked a rise in demand for scrap copper.
How much should investors pay attention to copper stockpiles? Speaking to Reuters, Robin Bhar, head of metals research at Societe Generale (OTC Pink:SCGLF,EPA:GLE), emphasized that it’s important to look at inventories across the globe to get a better picture of the copper supply landscape.
“The LME in theory is a barometer of supply and demand and looking at LME stocks you’d be pretty bullish on metals prices. But if you look at the global picture and include ShFE and Comex you probably want to be a bit more neutral,” he said.
Copper price today: What’s next?
Copper currently has many factors working in its favor. After enjoying a boost this past year, it’s possible that further supply disruptions and improved demand may continue to impact the market, driving copper prices up further. Regardless, major player China will continue to be the biggest factor at play in whether copper prices swing up or down.
In the mid to long term, there are a few developments worth nothing that may affect the outlook for copper. The US House of Representative passed a US $1.5 trillion infrastructure bill in mid-2020, which some are hopeful will pass the Senate next year no matter who is in the White House. The electric vehicle market is also expected to raise demand for copper over the next decade.
What do you think is next for the red metal? Tell us in the comments what you think drives the copper price today, and what could be in store for the future.
This is an updated version of an article originally published by the Investing News Network in 2015.
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Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.