The revision is caused by weaker-than-expected economic recovery in China and fears of further rate hikes in the US.
The 2023 average annual copper price forecast has been revised down from $8,800 per tonne (/t) to $8,550/t by financial information services provider Fitch Solutions. This is caused by fears of another US Federal Reserve interest rate hike and macroeconomic factors in China.
Demand for copper in China fell in September, at a time when it usually picks up. According to the National Bureau of Statistics of China, total profits of industrial enterprises in China from January to July were down 11.7% year on year. Copper is a key input in the industrial process, and demand has, therefore, been limited by the state of Chinese industry. The continuing property crisis in China has also had a negative effect on prices.
Prices have fallen steadily since a mid-January peak of $9,356/t, spurred by expectations of a strong rebound in Chinese demand. By 19 September, prices had fallen to $8,293/t, down 11% from the January high.
Despite Fitch’s downward price predictions, analysis from global investment banking company Goldman Sachs suggests that copper demand in China is experiencing a comeback. Its data implies that copper demand in China has risen 8% year on year. The Goldman report said: “This strength in demand has largely been tied to a combination of strong growth from the green economy, grid and property completions.”
The investment bank notes that growth in China’s green sector could outweigh the stuttering property market’s impact on copper prices.
The Fitch analysis notes there will be short-term supply disruptions as several smelters undergo maintenance, which could lead to some upward pressure on prices. However, total output will increase from 27.3 million tonnes (mt) in 2023 to 35.2mt by 2032, averaging 3.1% annual growth.
Source: Mining Technology