Yesterday we saw a 5% surge in Copper prices, reaching its highest level since February last year, which can be attributed to several factors. Primarily, the rally follows positive China Purchasing Managers’ Index (PMI) data released earlier this week. As China accounts for over half of global copper demand, positive economic indicators from the country tend to drive up copper prices.

Moreover, there is increased anticipation of additional stimulus measures from China, which could further bolster copper prices and potentially push them to 4.35 which is the high from January 2023 and closer to the $5 mark. This rally in copper prices paints a positive picture of the global economy, as copper is widely viewed as a barometer of economic health due to its extensive use in various industries.

On the supply side, the closure of the Cobre Panama mine late last year has removed approximately 1.7% of the world’s copper supply, resulting in a supply deficit this year. Analysts do not anticipate a resolution to this supply issue until at least 2026. Additionally, there are limited expectations for significant new copper supply coming online for the remainder of the decade.

Copper ChartDaily – The 20 SMA Supported During the Pullback

This situation could potentially lead to material shortages, especially if there is increased energy consumption due to the green transition or demand from artificial intelligence (AI) technologies. Overall, the current arrangement in the copper market presents both challenges and opportunities. While the supply deficit and potential shortages may pose challenges for industries reliant on copper, the positive economic indicators and demand outlook suggest a favorable environment for copper prices. Janet Yellen was speaking on relations with China yesterday, which is another bullish factor for copper.

US Treasury Secretary Janet Yellen Speaking on China-US Relations

1. Economic Fairness: Yellen emphasizes the importance of maintaining a level economic playing field between the US and China. This suggests a commitment to addressing concerns regarding unfair trade practices and ensuring fair competition.
2. Overcapacity and Subsidies: Yellen expresses concerns about China’s overcapacity, which may be fueled by massive subsidies. This highlights ongoing issues related to industrial policy and state support for certain industries in China, which can distort global markets.
3. Dialogues with China: The Biden administration intends to continue engaging in ongoing and deepening dialogues with China. This signals a commitment to diplomacy and dialogue as a means to address bilateral issues and promote cooperation where possible.
4. Potential Tariffs: While Yellen does not directly comment on the possibility of new tariffs on China, she does not rule out using measures to protect the US clean energy supply chain. This suggests that the administration may consider targeted measures to address specific challenges related to supply chain security and competitiveness.