Copper Prices Will Remain Under Pressure Due To Macro Headwinds
Copper has lost its gains this year as inflation, interest rates, and energy costs continue to rise. The red metal’s short-term demand outlook remains bleak owing to recession fears, China’s slowdown, and slowing global manufacturing activity.
Copper has lost its gains this year as inflation, interest rates, and energy costs continue to rise. The red metal’s short-term demand outlook remains bleak owing to recession fears, China’s slowdown, and slowing global manufacturing activity.

Copper Fails To Maintain Its Gains
LME prices are now down approximately 30% from their peak in February, following Russia’s invasion of Ukraine, when the three-month LME copper price reached $10,580/t. Despite the fact that copper’s fundamentals appear to be supportive, the red metal has struggled to hold onto its gains as global slowdown fears stay high.
China Continues To Be A Major Question Mark
Covid-19 lockdowns in an already decelerated Chinese economy have persisted in dampening the red metal’s demand perspective, with the country’s property industry remaining a big question mark for the copper market in the future. For nearly two decades, the development of the property sector in China and the country’s rapid urbanization have been the primary drivers of growth in copper demand, which accounts for nearly a quarter of total demand.
The country’s GDP grew 3.9% year on year in the third quarter of 2022, faster than the consensus forecast of 3.3% YoY and 0.4% YoY in the second quarter, but real estate contracted 4.2% YoY due to unfinished projects that slowed activity in the industry from land bidding to housing starts. However, hopes have increased recently that new stimulus initiatives will boost demand for the red metal following moves to shore up the country’s property sector and ease Covid restrictions.
The loosening of China’s Covid-related quarantine measures shortens the quarantine period for incoming travelers and close contacts of those who test positive. Furthermore, secondary contacts will no longer need to be tracked down. The government also stated that it would increase vaccinations among senior citizens, though it refrained from issuing mandates to help raise inoculation rates.
Even so, while these policy changes are taking place, China is also experiencing the highest number of daily Covid cases since April. Beijing recently saw the country’s first Covid deaths in six months as the city tightened its restrictions. Guangzhou has sealed off its largest district as the number of reported crimes continues to rise. Reports of Covid protests in China will also likely harm general sentiment.
The recent relaxation of quarantine requirements is certainly a move in the right direction, but the market will almost certainly require further relaxation if this enthusiasm is to be sustained.
China has also recently introduced 16 property measures to assist the weak property sector. Some of these measures include debt extensions for the industry and lowering deposit requirements for homebuyers. These could possibly increase the use of industrial metals like copper. Civil and building construction accounts for about 23% of China’s copper end-use.
For the time being, the country’s uncertainty about Covid-19 restrictions weighs on demand for the metal.
Imports of both metal and ore fell to their lowest point in over a year in October, as factory activity slowed. Concerns about China’s economy are likely to continue to exert pressure on copper till the government eases Covid-19 restrictions further.
However, the Chinese government is likely to stick to its zero-Covid policy through the winter and will consider relaxing some of the restrictions after the National People’s Congress in March or April next year. Preferential policies on property developer financing might limit the growth of unfinished residential projects. China’s condition will probably get better but remain sluggish until 2023, with its zero-Covid strategy likely to stay in place until then.
Caught Between Falling Demand And Shrinking Supply
Supply disruptions in South America remain a concern for copper. According to the most recent International Copper Study Group data, Chile’s mined copper production fell by 6% in 2022 through July due to low ore grades, labor issues, and water scarcity.
Chilean output fell by 1.84% year on year last year, to 5.73 million tonnes, the lowest since 2017. The country’s ore quality has also been steadily declining. Copper mining grades averaged 1.41% in 1999 but are now around 0.60%.
Protests by local communities in crucial mining areas in Peru have also continued this year. Recently, the Las Bambas copper mine in Peru, owned by Chinese miner MMG and accounting for 2% of global copper supply, has begun to reduce operations due to recent roadblocks. MMG cut its annual copper production forecast at Las Bambas to 240,000 tonnes in August.
Despite the high level of interruptions, global mine production grew strongly in the third quarter of this year. CRU predicts that global development will reach 3.2% year on year in 2022. The ramp-up of Ivanhoe Mines’ Kamoa-Kakula mine in the Democratic Republic of the Congo, as well as Anglo-American’s newly-commissioned Quellaveco mine in Peru, are both contributing to the growth.
Near-Term Headwinds But Upside Threats To Dominate Long Term
Recession fears, China’s slowdown due to Covid-19 constraints, and the Fed’s interest rate hike path will continue to drive copper’s short-term price outlook, but tightening supply must keep the red metal’s price support above $7,500/t through 2023.
Copper prices will stay under pressure until the global growth outlook improves. Tight supply will then become the market’s main focus, supporting prices above $8,000/t in the fourth quarter of 2023.