Copper prices have experienced a remarkable surge for the fourth consecutive session, driven by robust consumption data from China and additional monetary support measures. The London Metal Exchange’s three-month copper climbed to $8,395 per metric ton, highlighting the significant momentum.
Despite the global market moving into surplus, China’s apparent demand for refined copper managed to grow by 9% during the first half of the year, as reported by the International Copper Study Group.
The correlation between copper and China’s yuan has gained strength, indicating the heightened focus of investors on China’s economic recovery. This connection has intensified due to the ongoing challenges in China’s economy, with the property bubble deflating and inflation impacting demand.
Monetary Stimulus Amplifies Copper Rally
Chinese authorities’ continuous support measures have provided a significant boost to the metals markets. State-owned banks actively collected offshore yuan, and efforts to slow the yuan’s decline are showing traction. Meanwhile, lead prices on the Shanghai Futures Exchange soared to a 17-month high. Contributing to the positive sentiment in the metals sector.
While the possibility of copper entering an energy transition super-cycle is being discuss. The market is also grappling with China’s old super-cycle. China’s previous growth, driven by infrastructure expansion and rising exports, is facing hurdles due to a deflating property bubble and weakened demand due to inflation.
The fluctuating sentiment in the market is driven by copper’s range-trading, influenced by directional momentum and China’s recovery narrative. Investment funds have adjusted their positions, showing uncertainty about the direction of copper prices.
As investors position themselves for an anticipated copper price break-out, the outcome remains uncertain – will it rise or fall? While China’s property challenges add pressure, increasing copper usage in energy transition applications offers a positive perspective.
The market is currently observing Doctor Copper’s struggle between the old China-driven cycle and the new energy transition focus, leaving fund managers in a state of flux.