China’s import market remains an important macroeconomic factor for the base metals market, including copper prices. The Chinese economic recovery will likely boost refined copper usage in the country and tighten global fundamentals in the second half of this year.
Higher copper prices when dollar weakens and China recovers
The LME official cash copper price came under pressure in April after hitting its highest level since mid-February at $9,081 per tonne on April 14. The weakness in copper prices came despite overall upward pressure across the base metals and stronger-than-expected macro data out of China.
In Q1 of 2023, the Chinese economy grew 4.5% year-on-year, accelerating from 2.9% in Q4 and exceeding market expectations of 4%. China’s economic development has been in the spotlight since the country reopened after nearly three years of strict Covid restrictions.
On the other hand, US copper demand is affected by ongoing economic concerns. The US Federal Reserve’s hiking cycle is nearly over; we believe the last rate hike in May will be a dovish one, given the deterioration in economic conditions. In light of this, the dollar will likely experience a bear market, which could act as a positive tailwind for copper prices.
Despite the recent pullback in copper prices, we expect the copper price forecast to experience higher highs and lows in the near term, partially due to the recovery of China’s base metals import market. Learn more about copper price forecasts.
Implications for copper price forecast
The release of China’s macro data for Q1 did not elicit a meaningful appreciation in copper prices. We believe there was some “buy the rumor, sell the news” behavior leading to profit-taking and weaker prices. The wave of long liquidation in the LME copper market was evidenced by the contradiction in the open interest. Fundamentally, however, there has been a historically tight relationship between China’s industrial production growth and copper prices. Consequently, we think that the recent slew of Chinese macro data is likely to boost copper prices in the coming months. Learn more about copper price forecasts.
To understand the complex market conditions influencing price volatility, download our monthly base metals price forecast, including the latest copper price forecasts today.
