Copper price defies pullback predictions

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Copper is trading at $3.626 a pound or about $8,000 a tonne on the Comex, still near an eight-year high. The bellwether metal is up more than 80% since demand tanked in the first half of 2020 as coronavirus lockdowns floored industrial activity.

Reasons for the expected lull include scrap, which typically starts to emerge at high prices, and the risk of wider lockdowns undermining industrial activity in the first quarter.

Most importantly, demand for copper has slowed in top consumer China, where imports have levelled off ahead of the Lunar holiday in February, when many factories close. China imported record volumes of unwrought copper and copper products last year, but the December number fell for a third consecutive month to 512,332 tonnes.

It is anticipated that copper will pick up momentum after the Chinese New Year holiday as demand gradually overtakes supply leaving the market with a substantial deficit.

“There isn’t going to be a lot of impetus from China to take the market forward until March,” Roskill Principal Consultant Jonathan Barnes said in a Reuters interview.

“China’s share of the copper market at 55% is now even bigger than it was because its consumption rose last year and almost everywhere else declined.”

Copper supplies are expected to rise this year as covid-related problems come to an end, but with prices at elevated levels the potential for disruptions remains as mine workers seek higher wages.

This, alongside sliding stocks in LME registered warehouses at 87,725 tonnes, which have more than halved since October and are at their lowest since September, will support copper. Low stocks will help propel prices higher later in 2021, according to analysts.

“Any price pullback to $7,600 should be used to build longs. We expect copper prices to reach $9,500 by mid-2021,” analysts at UBS said. They expect copper supply to rise 2.9% this year and a deficit of 469,000 tonnes.