Market Analysis: Copper Price Surges Amid China’s Stimulus-Driven Optimism

Copper prices have commenced the year as a dominant force in the commodities market, climbing more than 7.5% within the first six trading sessions. The metal has surged to $4.30, nearing the December highs of $4.34, where it may encounter resistance as the market becomes increasingly saturated.

Copper (XCU/USD) daily chart

Past performance is not a reliable indicator of future results.

Key Drivers Behind the Surge

The recent rally in copper prices appears to be fuelled by a combination of supply constraints and an optimistic demand outlook. China’s ongoing stimulus measures are anticipated to significantly boost industrial activity, leading to increased demand for copper. The metal’s critical role in emerging technologies and infrastructures—such as renewable energy and artificial intelligence—further bolsters its appeal as a speculative investment.

On the supply side, the development of new copper mines remains a slow and capital-intensive process. This disparity between the steady growth in demand and limited supply expansion has been a fundamental driver of the recent price increases.

Copper’s Volatility in 2024

The year 2024 was marked by significant volatility for copper prices. The metal briefly surpassed the $5 mark in the first half of the year, only to decline sharply as concerns about the Chinese economy emerged. As both the largest supplier and consumer of copper, China’s economic performance heavily influences the metal’s pricing dynamics.

In September 2024, China introduced a series of stimulus measures aimed at mitigating economic challenges, including a prolonged property market slump, weak consumer confidence, and global uncertainties. These actions temporarily reignited copper prices, which peaked at $4.70 before retreating towards the year-end due to insufficient follow-through on announced measures.

Outlook for 2025

The momentum in copper prices could remain positive if China’s economic outlook continues to improve. Analysts anticipate further monetary easing from Beijing, including additional rate cuts and reductions in bank reserve requirements, to support economic growth. However, the initial rally may lose steam in the coming weeks as investors await greater clarity on the implementation of these measures.

Potential headwinds could arise from the introduction of tariffs by the United States, which might elevate inflationary pressures. While demand for copper in the U.S. is expected to remain robust due to a resilient economy and the growing popularity of electric vehicles, global economic growth may slow if tariffs restrict monetary policy flexibility by the Federal Reserve.

A Delicate Balance

The current landscape appears to hinge on the interplay between U.S. tariff policies and China’s stimulus efforts. For now, the momentum in copper prices remains positive, but the market is likely to encounter challenges in the months ahead.