By Anna Szymanski
NEW YORK- Copper is all charged up. The base metal’s price has spiked around 40 percent from March lows.
Chinese demand, supply crunches and a weak dollar have all pushed up prices. Rising stocks may bring a reversal. But demand for renewableenergy infrastructure should support a long-term upward march.
It is mostly a China story. Positive economic data from the world’s largest copper consumer has supported price jumps, including a higher-thananticipated official manufacturing Purchasing Manager’s Index figure on Wednesday, signaling expansion.
Beijing’s stimulus rebooted industrial production after Covid-19 shutdowns.
The package released in May totaled at least 4.5 percent of GDP, according to the Peterson Institute for International Economics. Investment in power infrastructure and real estate boosted copper demand.
Supply problems also helped juice prices. In the first six months of 2020, Peru – the world’s second-largest copper producer – saw its year-over-year production fall by over a fifth, according to the government, because of the country’s severe lockdown to fight coronavirus infections.
Also, commodities priced in dollars are often more attractive as the greenback softens. And the US dollar currency index has slipped more than 6 percent in the past six months. The result was a surge to the highest price since 2018.
Recovering supply is damping the price spike, with copper posting one of its worst days in months on Thursday.
Peru’s government recently said its production issues are mostly resolved.
And inventories on the London Metal Exchange more than doubled in the previous week, according to Reuters.
Yet green energy needs should drive copper prices long term. The efficient conductor is used in everything from electric cars like those made by Elon Musk’s Tesla to wind- and solar-generation technologies. Demand could more than double by 2050 if countries cut hydrocarbon use aggressively, according to the World Bank.
Governments are getting on board.
China has pledged to be carbon neutral by 2060. European Union leaders in July unveiled a 500 billion-euro effort to reduce emissions and support clean energy.
Joe Biden, the Democratic nominee leading the polls in the US presidential race, has put forward a nearly $2 trillion plan to fight climate change. Even if all fall short, green investment should still skyrocket.