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The copper market has experienced significant volatility due to macroeconomic factors, particularly China’s influence and the U.S. Federal Reserve’s policies. With China consuming nearly 50 per cent of global copper production, its economic health, especially in the housing sector, heavily influences copper prices. In this State of the Economy podcast,businessline’s Subramani Ra Mancombu speaks to Kishore Narne, Director & Head - Commodity & Currency - Motilal Oswal Commodity Broker Pvt Ltd, on the factors influencing copper pricing.
Initially, expectations of a Chinese economic stimulus and U.S. rate cuts spurred copper prices. However, the absence of such actions from both countries led to a downturn in copper prices. The U.S. Federal Reserve’s decision to maintain interest rates and China’s lack of significant economic announcements disappointed the market, leading to a rally in the U.S. dollar and a subsequent fall in copper prices.
Looking ahead, several factors will shape copper prices. The U.S. Federal Reserve’s approach to interest rates and the potential for a soft economic landing in the U.S. are crucial. Recent U.S. economic indicators suggest cooling inflation and rising unemployment, making a rate cut more likely in the near future. However, China’s economic recovery remains uncertain, and its weak demand for copper may limit any price increases.
Additionally, the low treatment and refining charges (TCRC) and increasing copper inventories indicate a mismatch between supply and demand. While smelters continue to produce copper, low end-consumer demand may eventually force them to reduce output, negatively impacting copper prices.
Other potential influences include the possibility of a deeper U.S. recession and the shift by some Chinese government agencies from copper to aluminum in infrastructure projects. However, the distinct properties and uses of copper and aluminum limit their interchangeability. In India, the copper market is more affected by global prices as India is a price taker rather than a price maker. Despite this, India’s ongoing infrastructure development and electric vehicle growth will continue to drive copper demand.
Listen to the podcast to know more.
(Host: Subramani Ra Mancombu, Producers: Anjana PV, Amitha Rajkumar)
About the State of the Economy podcast
India’s economy has been hailed as a bright spot amid the general gloom that seems to have enveloped the rest of the world. But several sectors continue to stutter even as others seem set to fire on all cylinders. To help you make sense of the bundle of contradictions that the country is, businessline brings you podcasts with experts ranging from finance and marketing to technology and start-ups
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