Copper Market Drivers
1. Dollar to Euro exchange rate
2. China copper price (proxy for demand)
3. US capacity utilization
4. Global production
5. Refiner treatment charges
6. Chilean copper production
China Demand is the Name of the Game
China really controls the copper story. Poor demand and near-term copper supply suggest copper will continue to struggle. Chinese government spending, construction spending, auto sales and power grid investment serve as the key drivers to Chinese demand as well as price support. Power grid investment has fallen. Each of these remaining indicators has fallen month over month from April to May and year over year.
Our own China industrial copper price data on the MetalMiner IndX™ shows that copper prices have already fallen by over 5% in June compared to May data. In addition, the average monthly prices in the chart below suggest that indeed Chinese industrial demand remains muted as prices are markedly lower compared to last year.
Three-month copper closed the month of June at $5,760/mt, down nearly 4+% from last month. Copper prices rallied up until May but have continued to fall. Copper remains in a long-term bearish market despite the fact that the dollar has begun trading sideways. Moreover, throw in a bit of Greek uncertainty and the global price picture for copper looks a bit murky (some believe a successful Greek outcome would be bullish for copper prices). Nevertheless, we remain bearish.
While the rest of industrial metals keep falling, we would expect copper prices to trade below $6,500/mt during the second half of the year, possibly diving to record lows.
So What Should My Industrial Buying Strategy Be?
This copper price forecast was excerpted from our brand new Monthly Metal Buying Outlook report. For a short- and long-term buying strategy with specific price thresholds, consult the July 2015 report!