The copper price won’t bounce far

While the copper price could stage a temporary recovery, don't count on the bounce lasting.

Copper has fallen back to six-year lows of around $5,000 a tonne in recent weeks.A sustained recovery looks unlikely. The economy in China, which accounts for 45% of copper demand, has slowed. While short-term stimulus measures may boost demand, China as a whole is set for a structural slowdown as its economic emphasis shifts from investment and infrastructure to consumption, according to Goldman Sachs.

Advertisement - Article continues below

Deutsche Bank thinks Chinese copper demand will grow by an average of 3% a year in the next five years, down from 7.5% in the last five. Other emerging markets won't take up the slack, says Henry Sanderson in the Financial Times: India, for example, consumes just 2% of copper output.

On the supply side, global copper stocks will amount to 80 days of average consumption by the end of the year, reckons Eleni Joannides of Wood Mackenzie higher than in 2008-2009. "That oversupply will get worse," says The Economist. "It takes several years to build a mine, so several firms were caught out when the market turned." New supply is still hitting the market and stocks may not peak until 2017. So while copper may rebound if sentiment towards emerging markets and commodities improves, it will soon run out of steam.




Commodities look cheap

Gold may be on a bull run, but industrial commodities, including copper, zinc and aluminium, remain cheap.
17 Jan 2020

Commodities are dirt cheap – but is it time to buy?

Commodities are staggeringly cheap, says Dominic Frisby. By some measures, they are twice as cheap as they were at the turn of the century. But does t…
12 Jun 2019
Industrial metals

Governments’ money-printing mania bodes well for base metals

Money is being printed like there is no tomorrow. Much of it will be used to pay for infrastructure projects – and that will be good for metals, says …
27 May 2020

Commodity prices are hitting new lows

Commodity prices are as cheap as they've ever been, but don't expect them to rebound as fast as they did after the global financial crisis.
22 May 2020

Most Popular

Global Economy

The MoneyWeek Podcast: James Ferguson on the virus, the lockdown, and what comes next

Merryn talks to MoneyWeek regular James Ferguson of Macrostrategy Partnership about what's happened so far with the virus; whether the lockdown was th…
28 May 2020

As full lockdown ends, what are the risks for investors?

In the UK and elsewhere, people are gradually being let off the leash as the lockdown begins to end. John Stepek looks at what risks remain for invest…
29 May 2020

Can the UK housing market escape a slump?

The Bank of England is predicting a 16% slump in house prices.
29 May 2020