Copper prices crossed US$3 per pound mark lately as the recovery in the Chinese economy, the world’s top consumer of the metal, gained momentum. A price rally is expected from mid-September at the earliest, when the traditionally strong copper season kicks in.
Copper for delivery for December 2020 trading on the Comex market in New York changed hands for US$3.065 a pound or US$6,757 a ton in early afternoon trade, the highest since June 2018. Monday’s move brings gains for 2020 to 10% and a mouthwatering 58% since the covid-19 lows struck in March this year.
Copper price will likely rise further towards the end of 2020, and that the current environment has strong parallels to the rebound in the copper price after the global financial crisis, thanks to massive stimulus efforts by Beijing.
Copper hit a low of US$1.32 a pound in January 2009, then surged to US$3.55 by April of the next year on its way to an all-time peak just shy of US$4.58 (more than US$10,000 per ton) in February 2011.
It is believed that while the effects of covid-19 could decrease world consumption of the metal up to 4% this year, the drop in mine output and scrap flows has been greater.
A key gauge of Chinese economic activity released on Monday showed continuing expansion of the country’s manufacturing and services sector in August.
But with fiscal support on course to be stepped up in the coming months, analysts believe there is some further upside to industrial activity. Meanwhile, it’s encouraging that the recovery is broadening out, with service sector activity now playing catch-up with industry.
An investment-led rebound would eventually also shore up consumer sentiment and household spending, keeping the overall economic recovery on track.