Why Copper Prices Are Likely To Sustain Recent Gains This Year
Copper prices have risen sharply over the past two months as a result of firming demand-side conditions. London Metal Exchange (LME) spot copper prices currently stand at levels of $5,500 per metric ton, after spending most of 2016 below levels of $5,000 per metric ton, as illustrated below.
LME Copper Spot Prices (Source: LME Website)
In this article, we will look at firming demand-side indicators that are expected to translate into higher average copper prices this year, as compared to the year gone by.
Firming Demand-side Conditions
China and the U.S. are the world’s two largest consumers of copper, with China by far the world’s largest consumer, accounting for around 45% of the world’s consumption of the metal. [1] Since copper is a metal with diverse industrial and infrastructure-related applications, consumption of the metal is highly correlated with economic growth. Indications of better than expected economic conditions in China and a robust outlook for U.S. economic growth have translated into expectations of firming demand-side conditions for copper.
Copper prices have declined over the past couple of years largely as a result of weakening economic growth in China. Though economic growth in China continued to decline in 2016, the country recently reported a GDP growth figure of 6.7% for the year, which was slightly above the IMF’s expectations of 6.6%. [2] [3] In addition, accelerating measures of wholesale price inflation have added to the certainty of firming domestic demand in China. [1] Though economic growth in China is still expected to slow this year, it could better expectations of 6.2% growth, which is likely to prop up Chinese demand for copper. [3]
Improving economic conditions in the U.S. have raised the outlook for economic growth in the U.S., which accounts for around 8% of the world’s consumption of the metal. [1] President-elect Trump has outlined plans for a $1 trillion ten-year revamp of domestic infrastructure, which has raised the demand outlook for copper from the U.S. [4] With an improved demand outlook from the world’s two largest consumers of copper, copper prices are likely to sustain the gains made over the past couple of months over the course of 2017. This is reflected in our forecasts for Freeport-McMoRan’s average realized copper prices, as illustrated below.
Have more questions about Freeport-McMoRan? See the links below.
- What Is Freeport-McMoRan’s Fundamental Value Based On 2015 Results?
- What Is Freeport-McMoRan’s Revenue And EBITDA Breakdown?
- How Has Freeport-McMoRan’s Revenue Composition Changed Over The Last 5 Years?
- By What Percentage Did Freeport-McMoRan’s Revenue & EBITDA Decline Over The Last 5 Years?
- By What Percentage Can Freeport-McMoRan’s Revenue & EBITDA Change Over The Next 3 Years?
- How Will Freeport-McMoRan’s Revenue Composition Change by 2020?
- Why Have Copper Prices Declined Over The Past Year?
- Why Is China Important For The Global Copper Industry ?
- Will Freeport Stock Recover To Pre-Inflation Shock Highs Of $52 Per Share?
- What To Expect From Freeport’s Q2 Results
- How Is Freeport Stock Faring Amid Volatile Copper Prices?
- Copper Prices Have Recovered A Bit. Is Freeport Stock Worth A Look?
- Lower Copper Prices Will Weigh On Freeport’s Q3 Results
- What’s Happening With Freeport-McMoRan Stock?
Notes:
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Notes:
- Iron ore, copper prices jump on upbeat economic forecasts, Mining.com [↩] [↩] [↩]
- China 2016 economic growth expected to be around 6.7 percent: state planner head, Reuters [↩]
- World Economic Outlook October 2016, IMF [↩] [↩]
- Trump’s $1 Trillion Promise vs. Congress, Wall Street Journal [↩]