Copper price in last ditch rally
Copper bounced on Tuesday after a rebound in Chinese manufacturing activity, but analysts cautioned that the market is far from returning to normal levels. Copper trading in New York rose by more than 4% to $2.248 a pound ($4,955 a tonne) on course to contain its first-quarter losses to below 20%. Two weeks ago the bellwether metal briefly traded below $2.00, levels last seen during the global financial crisis of 2008-2009. The official manufacturing PMI increased from a record low of 35.7 in February to 52.0 in March, according to China’s National Bureau of Statistics. This jump was driven by a rise in the output and new orders components, with readings above 50 indicating expansion.Capital Economics in a note points out that this does not mean that output is now back to its pre-virus trend but “simply suggests that economic activity improved modestly relative to February’s dismal showing, but remains well below pre-virus levels”: The London-headquartered research firm predicts the price of copper will fall further in the second quarter, reaching a trough of around $4,000 per tonne ($1.80 a pound):
If anything, we suspect that the risks to this forecast are to the downside.
Thereafter, if we are right in assuming a steady relaxation of virus containment measures, the price of copper should start to rise again from the second half of 2020.China is responsible for more than 50% of the world’s copper consumption and after rapid expansion in recent years, now also produces the bulk of the world’s refined copper.