Copper Prices Volatile Amid U.S. Tariff Concerns and China Demand Outlook by Amit Gupta, Kedia Advisory
Copper prices exhibited a choppy trend last week, with MCX copper settling at Rs 899.80, while LME copper hovered near $9,793 per metric ton after hitting a high of $9,822.5. Despite strong demand expectations, concerns over U.S. tariffs on copper imports and weaker economic data from China weighed on sentiment. The U.S. Commerce Department's investigation into copper imports raised fears of a potential 25% tariff, driving speculation on inventory movements. Meanwhile, Chile’s copper production decline and China's stimulus measures are expected to impact market trends, with big bank's forecasting tight supplies and price fluctuations in the coming months.
Key Highlights
* MCX Copper settled at Rs 899.80, while LME copper closed near $9,793/mt.
* U.S. copper tariffs may reach 25%, impacting global supply chains.
* China's economic data disappointed, but stimulus measures support demand.
* Chile's copper output dropped 24% MoM, adding to supply concerns.
* Goldman Sachs and Citigroup foresee copper nearing $10,000/mt in Q3 2024.
Copper prices saw a fluctuating trend last week, with MCX copper ending just below the Rs 900 mark. LME copper prices opened at $9,797/mt, peaked at $9,822.5/mt, and closed at $9,793/mt, registering a modest 0.45% gain. The initial rise in prices was driven by supply-side concerns and a weaker U.S. dollar, making copper cheaper for international buyers. However, market volatility increased as concerns over a 25% tariff on U.S. copper imports surfaced, leading to shifting inventory flows and speculation on potential price disruptions.
On the macroeconomic front, the U.S. consumer confidence index declined for the third consecutive month, and inflation expectations hit a new high at 4.9%. Additionally, China's economic data showed weaker-than-expected lending figures, raising concerns about industrial demand. However, Beijing's latest stimulus measures, aimed at reviving consumption and stabilizing financial markets, could provide some support to copper demand in the near term.
Geopolitical developments also influenced copper prices. With the U.S. Commerce Department investigating copper imports, speculation grew about inventory movements, with SP Angel analysts reporting a rush of copper stocks to U.S. exchanges. Goldman Sachs estimates that U.S. net copper imports may surge 50%-100% before tariffs are imposed, potentially driving domestic copper inventories to 300K-400K tons by the end of Q3. Meanwhile, Chile, the world’s largest copper producer, saw a sharp 24% month-on-month decline in production, further tightening global supply.
Citigroup remains bullish on copper, forecasting LME prices to reach $10,000 per metric ton within the next three months. The bank also noted that supply disruptions and seasonal demand surges could sustain tightness in global markets. However, the looming U.S. tariffs create a complex scenario, as high import duties could slow copper demand while increasing short-term price volatility.
So, Copper prices remain supported by supply-side constraints and China’s stimulus efforts. As long as MCX copper holds above Rs 885, it can test Rs 908-Rs 912 levels, with fundamental factors providing backing.
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