Copper prices retrieved but will the momentum continue?

Copper has seen some losses amid the coronavirus outbreak. However, the metal recovered, due to optimism of a fast reopening of the global economy. Copper gained more than 22% since its prices hit a four-year low during mid-March and dropped to $4371. Still, the metal’s prices are considerably lower than the $6000 level it had prior to the coronavirus crisis. 

Belief in developing coronavirus vaccines and industrial reopening of China fuelled hopes of fast recovery for the global economy. Several economies have already reopened after the coronavirus lockdown. This also hints at more demand for industrial commodities like copper.

Frequently, analysts look at copper as a measure of global economic health. Coronavirus has hurt the global economy even more than analysts had feared. Industrial activities massively declined in China, US, Japan and Europe, as a result. 

Fear of recession and a sharp fall in demand hit the prices of all industrial commodities. 

Demand from China is still suffering

Consumption and imports are shrinking in China, but industrial activities are picking up. 

The global copper market is expected to get oversupplied because of weak demand. The International Wrought Copper Council forecasts that the surplus of the copper supply will be 285,000 tonnes in 2020 and 675,000 tonnes in 2021. The agency noted as well that the metal supply and demand factors are uncertain because of the economic disruption and its effect on the copper industry.

China’s demand for copper dropped by 2.8% to 11.87 million tonnes in 2020. However, analysts forecast it to rise by 2.6% next year. Since copper is widely used in construction and power sectors, China accounts for almost half of the world’s consumption of the metal.

Demand for copper is likely to deteriorate from Europe and North America too. Analysts expect copper mine production to drop by 4% to 19 million tonnes in 2020. Meantime, in 2021, it should increase by 6.7%.

Due to the negative impact of the coronavirus pandemic, industrial activities remain on the lower side.

So, going forward, a swift turnaround in demand would be unexpected. Global industrial activities remain on the lower side due to the negative impact of the pandemic. Rising tensions between China and the United States is likely to intensify. It would weigh on copper demand from China, which is the largest consumer of the metal. 

Meanwhile, central banks have taken massive economic support measures, which could offer slight support for copper.

In the domestic futures market, present advances are likely to pick momentum. However, strong upside barriers are located around Rs 440 per kg and Rs 458 levels. The downside reversal position is currently at Rs 378.