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.
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.
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.
Sandeep has longstanding experience with financial markets. Starting with a Chicago-based hedge fund as a financial engineer, his career has spanned a variety of domains and organizations over a course of 8 years – from Barclays Capital’s Prime Services Division to (most recently) Nasdaq’s Index Research Team.
Sandeep holds an M.S. in Finance as well as an MBA from Illinois Institute of Technology Chicago.
Julian joined Leverage Shares in 2018 as part of the company’s primary expansion in Eastern Europe. He is responsible for web content and raising brand awareness.
Julian has been academically involved with economics, psychology, sociology, European politics & linguistics. He has experience in business development and marketing through business ventures of his own.
For Julian, Leverage Shares is an innovator in the field of finance & fintech, and he always looks forward with excitement to share the next big news with investors in the UK & Europe.
Violeta joined Leverage Shares in September 2022. She is responsible for conducting technical analysis, macro and equity research, providing valuable insights to help shape investment strategies for clients.
Prior to joining LS, Violeta worked at several high-profile investment firms in Australia, such as Tollhurst and Morgans Financial where she spent the past 12 years of her career.
Violeta is a certified market technician from the Australian Technical Analysts Association and holds a Post Graduate Diploma of Applied Finance and Investment from Kaplan Professional (FINSIA), Australia, where she was a lecturer for a number of years.
Oktay joined Leverage Shares in late 2019. He is responsible for driving business growth by maintaining key relationships and developing sales activity across English-speaking markets.
He joined Leverage Shares from UniCredit, where he was a corporate relationship manager for multinationals. His previous experience is in corporate finance and fund administration at firms like IBM Bulgaria and DeGiro / FundShare.
Oktay holds a BA in Finance & Accounting and a post-graduate certificate in Entrepreneurship from Babson College. He is also a CFA charterholder.
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