Unlocking The Secrets Of Dramatic Copper Price Movements: A Combination Of Factors

Copper price movements are usually influenced by a combination of factors, and the following are some of the factors that have a significant impact on copper prices:

1: Supply and demand

Global copper mining capacity is mainly concentrated in the Americas, Asia and Africa and other regions, with the copper mining capacity in Central America being particularly prominent.

A reduction in supply or an increase in demand for copper mines could drive copper prices up, while the opposite could lead to a fall in copper prices. For example, the shutdown of CobrePanamá, one of the world's head copper mines, in November 2023 due to environmental factors; the downward revision of the 2024 copper production target by Anglo American, a British mining group, in order to reduce costs; and the announcement of the closure of a giant copper mine in Panama will reduce the supply of copper. And the development of new energy vehicles and other industries will increase the demand for copper. According to CICC, the global new energy consumption of copper in 2024 may increase by 570,000 tonnes to 3.53 million tonnes. Citibank expects renewable energy targets set by countries to increase demand for copper by 2030 by an additional 4.2 million tonnes.

2: Macroeconomic conditions

Growth or recession in the global economy can affect copper demand. When the economy grows, industrial production and consumption usually increase, and demand for copper rises, which may push up copper prices; the opposite is true when the economy is in recession.2024 The global manufacturing PMI in March was 50.3%, up 1.2 percentage points from the previous month, ending the trend of 17 consecutive months of operation below 50% and returning to the expansion zone of more than 50%, which shows the upward repairing trend of the global economy, which gives the market a good opportunity to repair. trend, which gives the market confidence in the macro aspect.

3: Monetary policy

Copper's financial attributes are closely related to the trend of the U.S. dollar, which in turn is influenced by the Fed's monetary policy. For example, when the Fed's rate hike cycle reaches its peak and rate cut expectations continue to ferment, it may support the upward movement of copper prices; however, if the U.S. employment data exceeds expectations and so on, leading to cooling expectations for rate cuts, copper prices may fall back in the short term. Such as the end of 2023, the Federal Reserve interest rate hike cycle topped, the market is expected to cut interest rates in March 2024 in advance, which was a strong support for the upward movement of copper prices, but on January 5, 2024, the United States announced the December non-farm payrolls new employment exceeded the market expectations, so that the Federal Reserve cut interest rates in advance of the expectations of the cooler, the copper price there is a short-term fall back to finishing possible. In addition, a stronger U.S. dollar will make copper more expensive in U.S. dollar terms, which may inhibit copper prices; a weaker U.S. dollar may provide some support for copper prices. 7 August 2024, the London copper futures market encountered downward pressure due to a stronger U.S. dollar

4: Global exchange inventories

The level of inventories reflects the supply of copper in the market. An increase in inventories could suggest an oversupply and put pressure on copper prices, while a decrease in inventories could suggest a relatively tight supply and support copper prices.

5: Geopolitical factors

Conflict-induced energy crises and supply chain uncertainty have a direct impact on copper prices. 2022 saw the outbreak of the Russia-Ukraine conflict, with Russia being one of the world's key copper producers, and the conflict leading to a spike in energy prices. Higher energy prices pushed up the cost of copper production, while the market was concerned about restrictions on Russian copper exports, and copper prices rose sharply in the early stages of the conflict, at one point in March 2022 exceeding $10,000 per tonne.

6: Market sentiment and speculative behaviour

Investors‘ and traders’ expectations, sentiment and speculative behaviour can also have a large impact on copper prices in the short term. For example, position adjustments by speculative funds and market short-selling may drive copper prices up or down.2022 The Federal Reserve has begun to raise interest rates sharply in response to inflation, and the market is concerned about a global economic slowdown. Investor pessimism about the outlook for copper demand rose and copper prices fell from US$10,700 per tonne in March 2022 to US$6,955 per tonne in July. Speculative funds withdrew from the copper market in favour of safe-haven assets, fuelling the fall in copper prices.

7: Related industry developments

The development of copper's downstream applications, such as power infrastructure, property and home appliances, and new energy vehicles, will affect copper demand. For example, the rapid growth of the new energy automobile industry will increase the demand for copper, while some technological iterations, such as the emergence of new technologies or materials that can reduce the use of copper, may inhibit copper demand and prices to a certain extent.

In short, copper prices are affected by a variety of factors. According to the business community data on August 12, 2024, copper prices have been falling since July shock, the main reasons include the off-season background of downstream consumption continues to be weak, purchasing demand in general, resulting in the market for copper prices is expected to rise more cautiously; processing enterprises new orders is difficult to increase significantly, making the copper processing enterprise's start rate to maintain at a low level; the market is relatively abundant, but the lack of demand leads to fluctuations in the water appreciation The range is small, the market is running under pressure. However, the business community analysts believe that in the international supply side of the tension and the domestic demand side of the gradual warming of the impact of copper prices in the short term is expected to usher in the opportunity to rise, but the global stockpile is high, the formation of the copper price suppression, need to pay close attention to the global economy as well as the inventory status.

In the long run, the trend of copper prices is the result of the interaction of a variety of factors, investors and related industries should pay close attention to the changes in these factors in order to more accurately judge the future trend of copper prices. At the same time, the market situation is complex and volatile, and sudden events or policy adjustments may have an impact on copper prices.