1. Global economic recovery drives increased demand
With the gradual recovery of the global economy, especially the recovery and growth expectations of the Chinese economy, the demand for copper has significantly increased. Copper, as an important raw material for industrial production, is widely used in fields such as electricity, construction, and transportation.
In addition, the development of new energy industries such as new energy vehicles and photovoltaics, as well as the increasing demand for copper in emerging economies such as India and ASEAN, have further driven up copper prices.
2. Increased supply tension
Several major copper producing countries around the world, such as Chile and Peru, have experienced production disruptions due to factors such as the pandemic and weather. Some large copper mines are also facing mining problems, resulting in reduced supply.
In addition, the annual growth rate of copper mine supply has been less than 2% since 2013, and the rise in energy prices has also increased the production cost of copper, further exacerbating supply shortages.
3. Loose monetary policy
The Federal Reserve has entered a rate cut channel, reducing borrowing costs and stimulating economic activity, thereby increasing demand for industrial metals.
The weakening of the US dollar has made copper priced in US dollars cheaper for holders of other currencies, further stimulating demand.
4. Geopolitical risks
The tense international geopolitical situation has led to an increase in uncertain factors in crude oil supply, which has a certain boosting effect on the energy and chemical sectors and indirectly affected copper prices.
In addition, political instability and policy changes in major copper producing countries such as Chile and Peru may lead to supply disruptions or reductions.
5. Increased investment demand
With the global economic recovery and increasing uncertainty, investors are seeking safe haven assets.
Copper, as a type of industrial metal, is favored by investors due to its resistance to inflation and ability to preserve and increase value.
The increase in investment demand is also an important reason for the rise in copper prices.
6. Uncertainty in tariff policies
The uncertainty of global tariff policies, such as the EU's retaliatory tariffs against the United States and Canada's retaliatory tariffs against the United States, has driven up copper prices. Under the support of import costs, there has been an increase, and due to arbitrage, global physical inventory has been transferred to the United States. LME copper inventory has declined, and expectations of spot shortages have pushed up prices.
7. Production reduction at the smelting end
The expectation of tight raw materials is heating up again, the smelting environment is still poor, and the spot copper smelting profit continues to decline. Some smelters have taken measures such as reducing production, early major repairs and extending the time, and unplanned major repairs to curb the further deterioration of the copper concentrate spot market, and supply side expectations are significantly limited.
In summary, the rise in copper prices is the result of multiple factors working together, including global economic recovery, tight supply, loose monetary policy, geopolitical risks, and increased investment demand. These factors are intertwined and jointly drive the sustained rise in copper prices.
