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.
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.
Market Insights
Education
Basket Builder
About
Why us
FAQs
Equities
Alternatives
Custom Baskets
Leverage & Inverse ETPs
Stock Tracker ETPs
All Products
