Resilient Chinese demand sees surprise copper rally

It was supposed to be a difficult year for copper, with prices declining 25% to a low of US$4618/tonne ($6332.46) on March 23 due to weak demand from Covid-19. Yet June and July have seen an unexpectedly strong rebound in copper prices, with the commodity experiencing a 42% growth to US$6,545/tonne on July 13.

“The dramatic price rally was backed by improved outlook for demand, especially in China, concerns over supply from mine operation disruptions due to COVID-19, and ample liquidity in the market, amid a low-interest rate environment and weak US$,” write DBS analyst Lee Eun in a broker’s report published on August 5

While demand will still likely decline by 2.4% y-o-y for 2020 due to a global demand slump, the silver lining is an anticipated 3.4% y-o-y rebound in 2021. Lee sees a flattish recovery for China’s copper demand following a faster-than-expected recovery of auto sales and government stimulus measures.