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Metal Miner

Metal Miner

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Copper Plagued By Supply And Demand Volatility In 2022

  • 2022 has been a volatile year for copper markets.
  • For the time being, copper remains within a sideways range.
  • Copper markets reeled from political unrest in Peru and Chile last year.
Copper

 

 

Via AG Metal Miner

Looking at 2022 copper price trends, the market was nearly as volatile as metals like nickel and aluminum. Currently, copper prices are attempting to break prior highs but have yet to get there. As copper taps into short-term resistance levels, the possibility of a pullback in price appears more and more likely. Meanwhile, the copper market environment is growing volatile, and intraday price action remains unclear.

For the time being, copper remains within a sideways range. 2022 proved a volatile year for copper prices as the industry battled a host of problems. Examples include supply shortages in Europe and political unrest in Peru and Chile (the world’s two largest copper sources). Also contributing to the price fluctuations was limited production in China (the world’s third-largest source of copper and the world’s largest producer of copper) due to zero-COVID and high inflation rates within the US.

Copper Price: Q1 of 2022

January 2022 arrived with sideways movement in the copper price trend. Inflation ran hot at 6.8%, and the possibility of interest rate hikes spiked, along with LME trading volumes.

February didn’t bring much change in the sideways copper price trend. In fact, prices traded completely flat, not rising or falling at all. This is something MetalMiner has seen only a handful of times since it began tracking the copper price index.  

That said, March arrived and brought a jump in prices with it. Prices rallied on March 7 before dropping down again on March 15. This volatility later proved to be the result of the various macroeconomic factors in Chile (election of a new president) and the Fed announcing a March interest rate hike.

Q2: Copper Volatility Continues

Copper continued within a sideways range in April, but moved more than in Q1. April 1 saw a 3.5% rise in the copper price. Meanwhile, the Fed proved firm in its stance on raising interest rates to cool off inflation. In response, investors began to prepare for aggressive, hawkish action.

Related: U.S. Oil and Gas Is In No Hurry To Grow

Come May, China’s stance on zero-COVID lockdowns became more firm due to more outbreaks, and copper prices reacted accordingly. This ultimately caused Chinese domestic demand for copper to drop, and the possibility of copper taking a bearish reversal appeared more likely. In June, copper prices did indeed slip just in time for another scheduled Fed rate hike.

Copper Price: Q3 of 2022

In July, copper prices fell to their lowest point since November 2022. Meanwhile, China experienced more COVID cases, and it appeared unlikely that zero-COVID measures would ease any time soon. This significantly added to the copper supply strain.

Copper prices saw notable increases in the lead-up to August. There were also several bullish indicators of note, including higher short-term highs.

In September, the copper price index moved up, but only by 1.13%. At the time, this effectively verified the index was in a sideways range. Ultimately, Chile rejected the possibility of passing a new constitution, which would have likely helped support prices amid the current market uncertainty.

Q4 of 2022: Copper Squeeze

At the beginning of Q4, the copper price trend turned downward. In total, the index fell by 5.6% before October 1. Meanwhile, the Fed remained hawkish with interest rate hikes. In September, the central bank implemented another 75 base point rate increase, leading commodity prices to react accordingly.

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In November, the copper price index moved out of its sideways trend and began a fairly sharp rally. That same month, the USD finally began to decline in value, helping hold copper prices up.

In December, copper prices remained bullish, rising by 3.87%. The Fed finally slowed the pace of rate hikes. As the year drew to an end, copper prices appeared to have much better support. However, a considerable amount of uncertainty remained regarding 2023 price trends. Peru found itself in an uproar. President Pedro Castillo was removed from office upon trying to dissolve the country’s congress and replace it with an “emergency government.” In the short term, this could end up restricting copper supplies as we enter 2023.

By AG Metal Miner

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