Copper ticks higher over weak dollar, China Covid recovery hopes

BY ONOME AMUGE

Copper rebounded into bullish territory on a weaker dollar and hopes for a recovery in top metals consumer China from tough Covid lockdowns as Shanghai took more gradual steps towards lifting its Covid-19 lockdown imposition, while Chinese equities gained on hopes for additional stimulus measures.

Three-month copper on the London Metal Exchange (LME) was up one percent to trade at $9,450 a tonne.

In a similar vein, the most-traded July copper contract on the Shanghai Futures Exchange closed one percent higher at 71,900 yuan or $10,677.64 a tonne.

Commenting on the development, Caroline Bain, chief commodities economist at London-based independent research consultancy, Capital Economics, noted that China would offer huge support for its economy.

According to Bain, while Chinese Covid restrictions are likely to be lifted in coming months, developed economies are set for weaker growth.

Forecasting her year-end price target for copper at $9,000, she said the combination of subdued growth in China and a slowdown in the U.S. and Europe, means that prices have further to fall.

A weakened dollar index, which sank to a one-month low as traders lowered Federal Reserve rate hike expectations, also lent support to the metals market, considering that a weaker greenback makes metals priced in dollars cheaper for holders of other currencies.

As a result, LME aluminium jumped 0.6 percent to $2,882 a tonne, zinc gained 1.8 percent to $3,801.50 a tonne, lead advanced 0.4 percent to $2,136.50 a tonne, tin added 0.8 percent to $33,905 a tonne, and nickel climbed 3.9 percent to $28,250 a tonne.

Speakers at the recent International Recycling Bureau (BIR) conference held in Barcelona, assert that metals are set for an upward trend in the long run, with market opportunities emerging for copper and aluminium product recycling, due to growing demand for both industrial metals.

Inka Guixa, analyst at Spanish copper processor La Farga, of the 14 million metric tonnes of secondary copper generated annually on a global basis, about nine million mt/year are currently recycled.

Guixa added that recycling levels are expected to be boosted by regulations curbing carbon emissions as overall demand for base metals grows.

According to her, copper demand will increase significantly, considering that energy transition is currently the biggest driver of copper demand.

Citing data from Italy-based energy company, Enel, Guixa stated that electrification and digitalisation should by 2030 require 31 percent more copper than the present time.

Tom Eng, senior vice-president of European recycler Tomra Sorting GmbH, in his presentation, said there are both challenges and opportunities in the aluminium recycling area.

According to Eng, European Union demand for aluminium is set to grow by an estimated 40 percent between 2018 and 2050, driven by transport, construction and packaging.

He noted that the growth in demand will be predominantly covered by recycled aluminium as there is limited primary production capacity and because the circular economy is pushing legislation for CO2 reduction and incentivising recycled content.