Copper, Not Crypto

We should all be paying more attention to Copper prices. It is the often ignored in favor of its shinier cousin Gold, but may offer more clues about inflation and the decade ahead. A thread on the red metal.

Copper is the 3rd most used metal in the world after iron and aluminum. It is typically correlated with economic health. Unlike almost every other commodity, Copper is down 10% YTD to $4.01/pound and 20% since its all-time-high in March of $5.04/pound. Is this good news?

40-50% of Copper is purchased by China, per Institutional Investor.

Five Reasons Copper Prices Have Risen

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Are falling prices an indication of a weakening Chinese economy? Well, Chinese home prices fell for a second straight month.

China’s new home prices fall again, more stimulus expected

From a year earlier, prices slipped 0.1%, down for the first time since September 2015 and retreating from a 0.7% gain in April.

CNBCWATCH LIVE

Other data from China has come in mixed. Industrial production, fixed asset inventory, and exports are up; Retail sales are down.

China’s economic numbers come in better than expected, but ‘difficulties and challenges’ remain

China released economic data for May that topped muted expectations for a month hampered by Covid controls.

CNBCEvelyn Cheng

Supply could be a factor here as well, with large mining projects coming online later this year in Peru, Serbia, and Chile.

Global copper supply to outpace demand next year, says RBC

Global copper supply will outpace demand over the next two years, helped by several upcoming large mine projects, RBC Capital Markets analysts said on Wednesday.

ReutersReuters Staff

in 2017, Bloomberg released an analysis that showed Copper is a better hedge against inflation than Gold.

More Precious Than Gold? Copper’s the Better Inflation Hedge

For centuries, gold has been a go-to asset among investors worried about all sorts of financial risks. In the past decade, exchange-traded funds backed by the metal drew more money than any other commodity. Even the world’s biggest central banks hoard bullion as a reserve asset.

BloombergSusanne Barton

It's possible Copper is a leading indicator for Crude oil prices, which have followed Copper's recent decline to drop 13% after testing March highs last week. Maybe the start of a commodity downturn?

Looking ahead later in the decade, this could just be a short-term respite. Turns out Copper is needed in rapidly growing industries, like electric batteries and semiconductor wiring.

Copper is ‘the new oil’ and low inventories could push it to $20,000 per ton, analysts say

The world risks “running out of copper” amid widening supply and demand deficits, according to Bank of America, and prices could hit $20,000 per metric ton by 2025.

CNBCElliot Smith

Within a few years, there may be a major supply gap and prices could head much higher.

Global supply gap likely to be 8.2 mt by 2030, copper is a good long-term bet | The Financial Express

JP Morgan says the emerging demand sector will not “reach a critical inflection point until the second half of the decade. Green transition application of copper will rise from 1.4m tonnes in 2020 to 2.6m tonnes in 2025 and 4.5m tonnes in 2030.”

Financialexpressguest

Any opinions or forecasts contained herein reflect the personal and subjective judgments and assumptions of the author only. There can be no assurance that developments will transpire as forecasted and actual results will be different. The accuracy of data is not guaranteed but represents the author’s best judgment and can be derived from a variety of sources. The information is subject to change at any time without notice.