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Copper Treads Water but Brighter Days are Ahead

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Websim is the retail division of Intermonte, the primary intermediary of the Italian stock exchange for institutional investors. Leverage Shares often features in its speculative analysis based on macros/fundamentals. However, the information is published in Italian. To provide better information for our non-Italian investors, we bring to you a quick translation of the analysis they present to Italian retail investors. To ensure rapid delivery, text in the charts will not be translated. The views expressed here are of Websim. Leverage Shares in no way endorses these views. If you are unsure about the suitability of an investment, please seek financial advice. View the original at

Copper plays a pivotal role in various electrical applications, encompassing power transmission, building wiring, plumbing, and electronic devices. However, the primary sector consuming copper is building construction, closely followed by electronics, transportation, industrial machinery, and consumer products.

Some pundits speculate that the surge in demand for electric vehicles (EVs) will propel copper prices to unprecedented heights. While this scenario is plausible, it is unlikely to materialize in 2024.

In fact, automakers scale back EV investments and inventories surge, signalling a potential slowdown in the electric vehicle sector. While EV sales maintain an upward trajectory, the growth rate is showing signs of fatigue, prompting concerns about a scaled-down outlook for the industry. Such a shift could impact commodities like copper, given that EVs require up to four times more copper than their internal combustion engine counterparts.

A graph of stock market

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Source: TradingView

Currently, the building industry remains the primary driver of copper demand and existing home sales and building permits influence copper prices.

In September 2023, existing home sales in the United States declined to their lowest since October 2010. This downturn is triggered by rising mortgage rates, discouraging first-time buyers, and existing homeowners with lower-interest-rate mortgages from selling.

Existing home sales witnessed a downtrend in 2023, with little incentive to sell unless under urgent circumstances. Forecasts for 2024 anticipate an increase in available units, contingent on economic conditions and potential Federal Reserve rate cuts. Generally, a decline in existing home sales is viewed as bullish for copper; however, prices have been dropping throughout 2023.

Despite increasing borrowing costs, the demand for building permits in the United States is still strong due to an ongoing housing shortage. Limited inventory of existing homes has led to a surge in customer demand for new homes, driving the need for building materials, including copper wires, and plumbing pipes. Building permits is showing a mild uptrend in 2023 and precedes the demand for copper in home construction.

Also, the copper market exhibits a seasonal pattern, particularly during the Spring new home construction period. This pattern stems from the need for copper by manufacturers in late Autumn to produce products required by home builders in the subsequent Spring. It’s worth noting that from late November to late January copper prices historically exhibit an upward trend, presenting an opportunity for traders.

Infrastructure initiatives, previously bolstering copper prices, are progressing, but the renewable sector faces persistent challenges. Wind development, once a cornerstone of bullish sentiment for copper, is now part of a narrative that suggests downward revisions in the face of obstacles. While global infrastructure spending continues to support copper demand, uncertainties cast shadows on earlier optimistic predictions for renewable sector growth. Despite this, copper prices are expected to rebound, although the ascent may not reach the 2022 high of $5.03.

Despite doubts about meeting expectations in the renewable sector, long-term bullish fundamentals persist. Challenges such as lower ore grades, protests, and inadequate investment persist in the mining industry. The copper market, presently in surplus, anticipates a future deficit, although the widely expected shortage is yet to materialize. The market grapples with oversupply amid increased output in China despite sustained demand from infrastructure projects.

From a technical perspective, copper prices appear undervalued at current levels and a rise to $4.00 is on the cards. Once resistance of $4.00 is cleared levels in the range between $4.30 and $4.60 are feasible over the longer-term.

Your capital is at risk if you invest. You could lose all your investment. Please see the full risk warning here.

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Sandeep joined Leverage Shares in September 2020. He leads research on existing and new product lines, asset classes, and strategies, with special emphasis on analysis of recent events and developments.

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Senior Research

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