The copper price was trading at its highest since
March 2013 on Tuesday after Chinese data showed manufacturing and construction
in the world’s second-largest economy was expanding at a pace not seen in a
decade.
On the Comex market, copper for delivery in March
jumped 2.4% to $3.5215 a pound ($7,764 a tonne) in New York, racking up its
fifth straight day of gains. The copper price has advanced 26% year to date
after recovering from a dip below $2.00 a pound at the height of the pandemic
in March.
According to Fastmarkets MB, benchmark 62% Fe fines
imported into Northern China were changing hands for $132.13 a tonne on
Tuesday. That was the highest level for the steelmaking raw material since
January 2014 and brings gains for 2020 to over 43%.
Asia’s
building, factory boom
Beijing’s official manufacturing PMI for November
rose to 52.1 while the Caixin manufacturing PMI, which gives a clearer picture
of activity outside large firms and the state-owned sector, jumped to a
ten-year high of 54.9.
THE CURRENT PRICE STRENGTH
IN COPPER “IS NOT AN IRRATIONAL ABERRATION”
The construction index was particularly robust,
increasing from 59.8 in October to 60.5. A reading above 50 indicates
expansion.
Capital Economics said China’s
November PMIs were “unreservedly positive” for industrial metals, and the good
news was not just confined to the country but showed a significant improvement
across Asia:
Buoyant global demand for (metals-intensive)
electronics appears to be a key driver of the recent strength, which is
reflected in the outperformance of Taiwan and South Korea.
Circling
back to the supercycle
Reuters quotes a
recent report by investment bank Goldman Sachs as predicting a return to the
“structural bull market” of the 2000s, a period of rapidly rising demand and
chronic underinvestment in new supply:
“Covid is already ushering in a new era of policies
aimed at social need instead of financial stability [which] will likely create
cyclically stronger, more commodity-intensive economic growth, that should
create the elusive cyclical upswing in demand.”
And this time the boom would be less dependent on
China, which already consumes more than half the world’s industrial metals, but
would be boosted by green energy spending in developed markets, says Goldman:
Spending on green infrastructure could be as
significant as the BRIC (Brazil-Russia-India-China) investment boom of that
decade while the redistributive push in developed markets “is likely to lead to
a large boost to consumer spending, comparable to the lending-fuelled
consumption increase in the 2000s”.
All-time
highs
At the end of that decade commodities peaked at
levels way above current prices – iron ore came close to topping $200 a tonne
in February 2011 and copper reached $4.58 a pound ($10,097 a tonne) that same
month.
Metalbulletin quotes the same report, with Goldman saying the
current price strength in copper “is not an irrational aberration,” adding that
market deficits through 2023 make it “highly probable” that the bellwether
metal will test the record high in the second half of 2022.
Source: mining.com