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Copper futures price: Global slowdown, China worries weigh on prospects for economic bellwether

By  Yoke Wong

Edited by Jekaterina Drozdovica

14:26, 26 October 2022

nuggets of native copper, isolated on a black background
Global slowdown, China worries weigh on prospects for the economic bellwether copper.

The three-month copper futures price traded at the London Metal Exchange (LME) rose over October as tight supply outweighed weakening global demand. The benchmark LME three-month copper contract settled at $7,560 a tonne on 24 October, up 2% from a month ago. 

What are the key drivers behind the copper prices rising despite the headwinds?  Here we take a closer look at the outlook for the metal’s price and the latest copper futures news.

What are copper futures?

Copper futures contracts are derivatives based on copper as the underlying asset. Copper futures prices are traded on exchanges such as the London Metal Exchange (LME), the Chicago Mercantile Exchange (CME) and Shanghai Futures Exchange (SHFE).

The LME was established in 1877 as the first global base metal exchange. Copper contracts traded at the LME are regarded as the global benchmark. The three-month copper contract is the industrial benchmark price, which originated from Victorian times when it would take three months to ship copper from Chile to the UK.

The LME remains the exchange with the highest volume of non-ferrous metal transactions in the world and high liquidity for three-month copper contracts. 

LME copper contracts are denominated in US dollars (USD) and settled by physical delivery. Participants on the exchange are producers, consumers, traders, banks, financial funds and commodity trading advisers (CTAs). 

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Copper futures price overview  

Copper is a key material for wires, tubes and pipes used in building and infrastructure. Demand for copper often mirrors the level of industrial activity globally. Amid growing recession fears, copper price today is increasingly under pressure as demand for the metal has fallen since the second half of 2022.

China is the world's biggest copper importer and demand in the country is the key driver of the market. LME copper price fell in the second quarter of 2022, when China imposed its “zero-Covid” policy and implemented strict lockdown measures to curb rising Covid-19 cases in several provinces. This severely impacted the country’s industrial activity and economic growth.

Copper futures price per tonne, 2017 - 2022

Prior to April 2022, the price of copper was mostly above $9,500 a tonne and briefly spiked above $10,600, an all-time high hit in early March as part of the wider industrial metal price surge following Russia’s invasion of Ukraine on 28 February.

Amid rising energy costs and recession fears, the price of copper continued to decline in the second half of this year reaching a low of $7,000 on 15 July before recovering in the subsequent months. 

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The October price increase was supported by supply tightness amid improving demand as Chinese copper imports rose amid lower prices and recovering industrial activities after the lifting of Covid restrictions. 

Copper spot price

Copper supply growth was revised downwards following “unexpected production constraints at a number of primary smelters and delays in ramp-up of capacity,” said the industry body International Copper Study Group (ICSG) in its Copper Market Forecast 2022/2023 on 19 October. 

The unexpected and longer-than-expected maintenance shutdowns in Chile, Brazil, Mexico, the US, Zambia and some EU countries have led to constrained output over the past year, ICSG noted. 

Meanwhile, according to China’s custom data, the world’s second biggest economy imported 4.4 million tonnes of unwrought copper in January-September 2022, up 9.8% year-on-year. 

Copper market forecast for 2022, 2023 and beyond

Despite the slowing global economy, ICSG forecast that copper demand will exceed production in 2022 and the world refined copper balance was expected to be in a 328,000 tonnes deficit. Copper market was forecast to swing back into a 155,000 tonnes surplus in 2023. ICSG said:

“Although the global economic outlook is challenging, manufacturing activity is expected to show sustained growth in most of the key copper end-use sectors.”

Following the end of the National People’s Congress in October, where Chinese president Xi consolidated his power for the third term, many market participants were concerned about the Chinese economic outlook amid China’s “zero Covid” policy. 

“President Xi’s strengthening of power suggests little reprieve from economic headwinds,” said Daniel Hynes, senior commodity strategist at ANZ Commodities on 24 October. 

In September, Rating agency Fitch Ratings revised its LME spot copper price forecast downward to an average of $8,700/tonne in 2022, down from $9,500. Fitch also cut its 2023 average price forecast by $500 to $8,000/tonne, while maintaining 2024 and 2025 projection at an average of $7,500/tonne. 

Note that analysts’ predictions can be wrong and should not be used as a substitute for your own research. If you decide to trade copper futures, you’d need to conduct your own due diligence, looking at the latest news, technical and fundamental analysis. Remember that past performance does not guarantee future returns, and never trade money you cannot afford to lose.

FAQs

Will copper prices go up or down in 2022?

Nobody can say for sure whether copper prices will go up or down in 2022. The market is volatile, and price movements will depend on supply and demand dynamics.

What is the highest price copper has ever been?

LME copper price hit an all-time high at above $10,600/tonne in March 2022.

Is copper price rising?

The three-month copper futures price traded at the London Metal Exchange (LME) rose over October as tight supply outweighed weakening global demand. The benchmark LME three-month copper contract settled at $7,560 a tonne on 24 October, up 2% from a month ago.

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The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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