Citi Research revised their forecast for copper prices Wednesday. They cited trade tensions between China and the US, as well as a poor outlook on demand.
Forecasts foresee copper prices at the London Metal Exchange to be $8,500 a ton by the end of the year, down from an earlier estimate of $9.500 a ton.
Citi anticipates that copper prices will average $9,000 per tonne in the fourth quarter 2024.
According to a Reuters article, the research agency attributed the downward adjustment in copper prices to concern over the resilience of the global manufacturing demand.
The manufacturing sector remains the primary driver of copper demand around the world.
Trade tensions between the US and China
Prices have been revised downward amid fears of worsening trade tensions with China.
The dollar rose after Donald Trump’s victory in the US presidential election of 2024. This pushed up commodity prices.
The LME copper prices fell by more than 6% since last Tuesday, as the stronger dollar increased the price of red metal for foreign buyers.
Trump is expected to increase tariffs on all imports from China, including metals.
It is expected that this will lead to higher inflationary pressures in the US, and make everything more expensive.
The trade between the two countries may be affected, which will limit demand for copper.
Trump’s position on decarbonisation would also affect the demand for copper.
Trump is expected rollback several climate regulations that were passed during the previous administration. He is also in favor of increasing oil and gas production in the US.
China stimulus disappoints
Last week, China’s National People’s Congress announced a stimulus package of $1.4 trillion to finance local government’s debt.
Metals industry disappointed as they expected concrete and targeted measures to support specific sectors.
Barbara Lambrecht is a commodity analyst with Commerzbank AG. She said:
The strong US dollar, and the disappointing statements made by the Standing Committee of National People’s Congress that we reported on are all factors that have put pressure on the metal prices.
Since September, China has announced a number of fiscal measures that have failed to inspire optimism regarding the growth prospects.
Analysts think that China is waiting to see how the Trump administration changes its policies before it announces a significant stimulus package.
China’s smelting capacity is increasing
Analysts from Commerzbank stated that the rise in smelting capacity in China also affected copper prices.
The production of refined Copper was 5% higher in the first nine-months of this year than it was during the same period last year.
According to a German bank, China’s smelting capacity has increased significantly. China is expected to provide half of all the metals in the world.
The bank stated that according to the research group Shanghai Metals Markets the capacity is expected to increase to 16 million tonnes next year.
The three-month contract for copper on the LME at the time this article was written, was $9,031.50 a ton. This is down 1.3% compared to the previous closing.
As new developments unfold, this post Citi Research lowers its copper price forecast amid US-China Trade tensions could be updated.
