Copper prices pressured by weak demand, sentiment, rising inventories — report

Fitch Solutions is revising down its 2023 average annual copper price forecast to $8,550/tonne, from $8,800/tonne previously as US dollar strength and market fears of another Fed rate hike places a cap on price growth.

Simultaneously, Mainland China’s service-led recovery, along with weak global demand continue to pressure prices along with investor sentiment towards industrial metals, including copper.

Although Fitch expects prices to improve slightly from current levels in 2023, the analyst  does not expect a return to the highs seen in 2022 as China’s real estate sector remains in doldrums.

Prices have averaged $8,628/tonne in the year to date as of September 19 2023, lower than the average of $8,788/tonne seen in full year 2022, on the back of subdued global demand in the main, the analyst said in its latest market report.

Prices have been on a steady downward trend since mid-January 2023, after peaking at $9,356/tonne on January 23 2023 on the back of expectations of a strong rebound in Chinese demand.

Prices were hovering around $8,293/tonne as of September 19, down 11% from the year to date high of $9,356/tonne.

The forecast of $8,550/ tonne for 2023 means Fitch expects prices to remain under significant pressure in Q4 as weak demand and rising inventory levels hammer prices.

Production

Globally, Fitch forecasts refined copper production to remain in growth territory over the coming decade despite some short-term supply disruptions from outside China, as a number of smelters undergo maintenance that will ultimately reduce total annual output volumes.

The analyst also expects supply issues in Latin America to hamper copper concentrate supply growth, leaving the market tight and putting pressure on refined copper supply in the coming months.

Fitch forecasts global refined copper output to climb from 27.3mnt in 2023 to 35.2mnt by 2032, averaging 3.1% annual growth.

Consumption

The analyst predicts global copper consumption growth to rise in 2023 by 2.9% to 27mnt, amid an uneven economic recovery in China and a drag from other markets.

Fitch notes that the green energy transition will partially offset this downside pressure. Over the rest of the decade, the firm anticipates strong demand growth driven by the renewables and autos construction industries.

The analyst expects global copper demand to increase from 27 million tonnes in 2023 to 36 million tonnes in 2032, averaging 3.3% annual growth.

Read the full report here.