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Copper Shortage Looms, But Will It Translate To Higher Prices?

  • Copper prices are facing both bullish and bearish pressure due to a potential supply shortage and slow demand in China.
  • Some experts predict that copper will continue to rise in 2023 if a supply shortage occurs, while others are less optimistic due to a possible recession weighing on demand.
  • Copper buyers should remain cautious and aware of the different factors that may affect the market in the short and long-term.
Copper

Via AG Metal Miner

In recent weeks, the copper market has taken an upward turn. However, many are curious whether or not copper prices today will continue this uptrend. Copper rose in December 2022 due to low inventories and hopes for recovery after China lifted zero-COVID restrictions. After that rally finally cooled down in January, prices appeared to finally find a bottom on March 16. Now that prices are ticking up again in the short-term, many experts wonder if the market will be able to continue fighting short-term bearish pressure.

As MetalMiner discussed in our March Copper MMI, China consumes 52% of the world’s copper. Unfortunately, the country’s post-zero-COVID recovery has proven slower than anticipated. This continues to suggest that bearish pressure could remain on the market. On the other hand, many experts continue to predict that copper will continue to rise throughout 2023, especially if a supply shortage hits. If copper supplies do become pinched, then prices could hit record levels within the next year. This is taking into consideration that copper prices are still at historically high levels.

In short: copper prices currently face both bearish and bullish pressure. However, China’s fluctuating demand for the base metal currently seems to be pulling prices more down than up in the short-term.

Copper Prices Today: A Short-Term Move Upward

Although the long-term trend for copper still looks bullish, prices have begun to suffer weekly losses. That said, prices are nearing weekly support levels. This could serve as a potential driver for short-term bullish price action. In the event prices reverse and induce buying strength, copper could see higher prices in the short and medium terms following a long-term uptrend. However, if prices break beneath the January 2023 low, it could lead to a medium-term downtrend.

Possible Supply Constraints: Are Supply Chain Woes on the Way?

According to Goldman Sachs, copper will hit record levels in 2023 due to a looming supply shortage and growing demand. However, commodity analysts at CIBC (Canadian Imperial Bank of Commerce) are slightly less optimistic about copper. This is because they expect a recession to weigh on that anticipated demand. 

Clearly, experts are somewhat at odds about where exactly prices could fall throughout the year. However, the possibility of copper supply constraints remains very real. Moreover, slow demand within China and mining issues in South America continue to add pressure to copper prices today.  

Ultimately, the long-term outlook for copper remains rosy and bullish. However, copper buyers should remain wary of factors like a US recession, slow demand in China and South American mining issues. These factors will continue to challenge the copper market.

By Jimmy Chiguil and Jennifer Kary

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