The geopolitical overhang on copper is showing signs of being removed, and its price is responding in kind.
Reuters has reported that the benchmark copper price was up slightly to $US5,991 ($A8,587) per tonne in morning trade on the London Metal Exchange — mostly on news that US officials would visit China to kick-start negotiations aimed at cooling a tariff war.
“The deepening rift between the United States and China has been a headwind for metals. There needs to be a resolution to the trade dispute,” SP Angel analyst Sergey Raevskiy, was quoted as saying.
“But the Chinese are being careful, they have provided stimulus and will probably do more if necessary.
“There isn’t much downside from here for copper.”
Demand for copper is closely aligned with manufacturing and construction, with the ongoing trade war effectively diminishing those sectors in China.
China accounts for roughly half of all copper demand because of it.
But while copper is expected to go up, it will be more of a slow burn than copper bulls would want.
“We expect prices to remain subdued this summer,” Citi analysts said in a note.
“Further China easing should see prices start to move higher by the autumn, reaching around $6,600 a tonne by year-end.”
Citi’s base case is for a small copper market deficit this year.
“Inventory levels are moderately lower than their long-run average level,” Citi analysts said.
“However, the market is not expected to get tight enough to disconnect from global macroeconomic developments.”
This content does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.
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