Copper Rallies, But Analysts Say Gains May Be Temporary

A recently conducted survey by Focuseconomics shows that some analysts upped their predictions for the price of copper in the final quarter of this year. The Barcelona-based company involved more than 24 investment banks and market research firms in its survey.

While the price of copper hit $9,200 per ton after a week of strong gains last week, the consensus prediction for the average prices of the red metal in Q4 2023 still remains below current levels, at $8,575/ton. The highest forecast, by Commerzbank, stands at $10,050 per ton while the lowest, by Euromonitor, stands at $6,500 per ton.

The price of the red metal is closely tied to the Chinese economy because the Asian country consumes more than one-half of all copper supplied globally. New data shows an increase in Chinese exports, which isn’t supported by indicators such as the rapid decline in factory gate prices.

It is expected that copper purchases in China will continue to drop, with the latest data also showing a 7% year-on-year decline in concentrate imports and an almost 20% drop in unwrought copper imports. Despite demand driven by the green energy transition, weakness in China’s building sector, uncertainty in supply chains and low inventories haven’t helped the metal’s price outlook.

At this rate, imports of refined copper may drop to less than 5 million tons this year, in comparison to the 5.9 million tons imported last year. Concentrate shipments are also expected to be less than the 25.3 million tons recorded in 2022.

The price of copper is also exposed to general economic trends, as a result of its extensive use in transport, industry, electric grids and construction. In a recent report, Neuberger Berman discussed phantom tailwinds for the international economy from China and argued that investor enthusiasm on the potential of the East-Asian nation to drive growth globally and mitigate a recession globally was possibly misplaced.

The private, independent, employee-owned investment management firm is based in New York.

While China recently allocated stimulus in the form of Total Social Financing, it is said to be the lowest in decades relative to the size of the country’s economy. In addition, China’s GDP growth target for this year is also the lowest since the mid-1970s, which means that there’s little appetite in fiscal support for growth.

Neuberger notes that the lack of strength in the currencies of commodity-rich trading partners, including Canada, New Zealand, Brazil and Australia, along with the drop in imports of input products are further evidences of weakness in the economy.

However, the growing electrification of transport and expansion of green energy is likely to give copper extractors such as Battery Mineral Resources Corp. (TSX.V: BMR) (OTCQB: BTRMF) a positive outlook going forward.

NOTE TO INVESTORS: The latest news and updates relating to Battery Mineral Resources Corp. (TSX.V: BMR) (OTCQB: BTRMF) are available in the company’s newsroom at https://ibn.fm/BTRMF

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