Earlier this week, the price of copper increased as the People’s Bank of China injected liquidity into the market, which helped the red metal recover from a new low while also showing support for the country’s economy. On the London Metal Exchange, benchmark copper rose 1% to reach $8,333 per ton. This comes after the metal hit $8,136.50 per ton, its lowest price since November 2022.
Aluminum on the exchange also rose by more than 1.5% to reach $2,266/ton, after on-warrant stocks in warehouses registered with the LME dropped to a 3-month low of 373,025 tons. In addition, other metals saw positive movements in their prices, with tin hitting $25,150 after a 1.3% surge and zinc reaching $2,572 per ton following a 0.9% increase. However, lead remained unchanged at $2,076 while nickel recorded a decline in its price, which saw it hit $22150/ton.
Arthur Parish, a metals associate at SP Angel, stated that the company had observed a slight rebound in base metal sentiment after the five-month low recorded last week. Parish also noted that while copper’s inventory levels were still high and the demand for the metal was muted, there were some signs of optimism developing in the country after the central bank’s liquidity injection drove shot-term recovery in prices.
Julius Baer, a Carsten Menke analyst, stated that following the weakness in metals last week, there was also some bargain hunting. Meanwhile, the U.S. dollar declined in value even further, which increased the attractiveness of dollar-denominated metals to holders of other currencies.
China is set to report its monthly retail sales and industrial production figures next week, which will offer evidence on whether demand is finally rising after the restrictions imposed during the coronavirus pandemic were lifted earlier this year.
On the supply side, a mine for the red metal in Tibet halted production following an accident last week, which increased support for the market. One senior analyst at Trafigura expects that later this year China will increase its imports of refined copper. The country remains one of the major producers and users of copper, with its manufacturing and construction sectors consuming roughly half of the copper produced globally.
Copper is used in transformers, wiring and other electrical components in electric vehicle charging stations and for the electrical grid. It is expected that the red metal’s usage in China will increase as the demand for renewable energy increases. This is because the metal is a good conductor of electricity, which makes it an important component in renewable energy systems and energy-efficient generators.
Major actors in the copper value chain, such as Southern Copper Corporation (NYSE: SCCO), are likely to keep a close eye on China since any developments there can have significant implications for the global copper market.
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