Bigger Than Dr. Copper, the Red Metal Is Also a Catalyst for the New Era

Bigger Than Dr. Copper
Published on: February 6, 2024

In 2023, only two types of metals saw their prices rise: gold and the red metal – copper. Recently, the 50-day moving average of copper prices has broken through its 200-day moving average, forming a bullish “golden cross,” and prices have stabilized in the range of $8,400-8,600 per ton.

However, copper is not just a traditional industrial metal and a commodity, but also a catalyst for a new era of global economic growth, playing a crucial role in global growth and sustainable development.

Entering 2024, the convergence of new and old demands will create excellent conditions for the continued rise of copper prices.

Some industry insiders predict a significant increase in copper prices in the coming months. Robert Friedland, founder of Ivanhoe Mines (TSX: IVN), predicts that the price of copper is expected to rise to $9,500 this year, based on factors including interest rate cuts and the recovery of demand in China. Robert emphasized that despite the softness of the Chinese real estate market, demand for copper from other industries and sectors remains strong. In 2023, China imported a record 27.54 million tons of copper.

Copper is often referred to as “Dr. Copper” because it can intuitively reflect the state of the macroeconomic cycle and the manufacturing industry. Its price trend is highly correlated with the economic trend. The latest Purchasing Managers’ Index (PMI) data shows that the global manufacturing industry is in a process of recovery, which will benefit industrial metals, including copper.

Specifically, in January, J.P. Morgan’s global manufacturing PMI recorded a neutral 50.0, ending 16 consecutive months below this boom and bust line. In addition, the S&P Global US Manufacturing PMI rose to 50.7 in January, the highest level since September 2022. Although the Institute for Supply Management’s (ISM) manufacturing PMI is still below 50.0 for the 15th consecutive month at 49.1, it has risen from December’s 47.1.

Furthermore, the Federal Reserve is expected to initiate interest rate cuts this year, and the economic situation this year seems to be better than many people expected, leading to increased demand for copper in the automotive and consumer goods manufacturing industries.

In addition to traditional manufacturing demand, the attractiveness of copper is also rooted in the major trend of green energy transformation. Its excellent electrical and thermal conductivity, as well as 100% recyclability, make it an outstanding metal material for energy saving, carbon reduction, and emission reduction. Copper’s use helps to reduce carbon dioxide emissions and the amount of energy required for power generation. Copper is an indispensable part of clean and renewable energy, effectively promoting the achievement of the “dual carbon” goal.

In 2023, renewable energy contributed an unprecedented 11.4 trillion yuan (1.6 trillion USD) to the Chinese economy’s GDP, and the country’s investment in clean energy technology last year reached a staggering $890 billion, equivalent to the GDP of Switzerland and Turkey. In addition, compared to traditional transformation technologies such as wind and solar energy, copper has become a better investment. Last year, copper prices rose slightly by 1.2%, while the S&P Global Clean Energy Index plummeted by over 21% during the same period.

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