Copper prices bounced back on Wednesday despite concerns of weaker demand ahead of a major holiday in China, the world’s top consumer.
Copper futures climbed 1.1% to $3.5635 a pound (or $7,856.21 a tonne) on the Comex by noon EST, rebounding from a one-month low.
China will celebrate its Lunar New Year holiday February 11-17, when metals demand usually dips as business activities slow.
Meanwhile, a recent coronavirus outbreak in China has dampened the country’s economic activities in January, dragging factory output and service activities growth to multi-month lows.
However, outlook for copper remains positive for the later months of 2021. Analysts believe soaring sales of consumer goods such as home appliances and cars outside China are expected to invigorate copper consumption and create shortages later this year.
For years now, copper prices have fluctuated with demand in China. But this year, consumption elsewhere such as in Western European countries will also be important.
Coronavirus lockdowns have meant many consumers who in previous times would have spent money on holidays, restaurants and other leisure activities are now choosing to buy electrical appliances and durable goods. This trend is expected to hold for some months.
Global copper consumption is forecast to rise 6% to 24.76 million tonnes this year after a 1.3% drop last year
“We are seeing some outright growth in developed market metals consumption in the construction, consumer appliances, and automotive sectors, as covid-19 drives home renovations and new home demand,” Citi analyst Oliver Nugent told Reuters.
Nugent expects the copper market to shift into a deficit in the second half of the year, resulting in a small surplus overall for 2021 followed by deficits in 2022 and 2023.
“In 2021, the market will pay more attention to the world ex-China demand than it has arguably done for the past decade,” Nugent said. “A data point people are talking about more and more is housing starts in the United States.”
According to BoA Securities analyst Michael Widmer, global copper consumption is forecast to rise 6% to 24.76 million tonnes this year after a 1.3% drop last year. He also sees Europe’s share of this at 3.1 million tonnes, a 10% jump from 2020.
(With files from Reuters)
