

Is Copper Losing Its Shine? Prices Tumble

Yesterday, Copper prices recorded their second worst single-day performance over the year to date, down 4.78% at $4.447 (the worst daily performance was May 22nd when they lost 5.95% to $4.7905). Investors and traders seem to have been cashing in on the industrial metal’s recent rally since it peaked at above $5.19 on May 20th. Copper prices formed a long bearish marubozu (long candle with no shadow) yesterday that closed just above the bullish Ichimoku cloud with the Relative Strength Index (RSI) falling below its neutral level of 50. Today, prices are slightly rising. Can traders expect the commodity to keep falling or to rebound?

Copper Daily Chart - Source: ActivTrader May Mania: Copper Prices Surged in May as Demand Optimism Heated Up Copper's story is one of remarkable longevity and adaptability. It stands as one of the first metals ever harnessed by humanity, playing a pivotal role in the rise of civilization. But what made copper so valuable to our ancestors? Well, mostly its ease of shaping, resistance to corrosion, and exceptional conductivity. These unique characteristics propelled copper to the forefront of technological advancement throughout history. Today, its applications continue to be incredibly diverse. In construction, copper wiring forms the backbone of electrical systems in buildings, ensuring safe and reliable power distribution. The same conductivity makes it critical for power generation and transmission, efficiently carrying electricity from power plants to our homes and businesses. Copper's presence is ubiquitous in modern electronics, from intricate circuits in smartphones to complex wiring within computers. The strength and versatility of copper also make it essential for machinery and transportation components, keeping our industrial sector humming. But copper's reach extends even further. As the world strives for a cleaner future, copper is emerging as a surprising hero in the green revolution. From efficiently transmitting power generated by wind turbines and solar panels to powering electric vehicle charging stations and the vehicles themselves, copper is woven into the very fabric of this sustainable future. The rise of artificial intelligence relies heavily on this remarkable metal. Copper wiring powers the data centres themselves, the humming hearts of the AI sector. It also provides the crucial connection to the power grid, ensuring a steady flow of electricity, and backs up generators in case of outages. These are just some of the ways copper continues to shape our modern world, but these two uses – artificial intelligence and green energy – are likely the biggest drivers of copper's demand today and in the near future. This surge in demand optimism is likely to have pushed copper prices to record highs in May 2024. Analysts predict continued strong demand as the world continues to urbanise, invest in clean energy infrastructure, and bet on the artificial intelligence hype to only be starting. This optimism about demand coupled with worries about copper supply are what drove the price of the industrial metal to a new record high last month. Copper Prices Should Remain Volatile Concerns about potential supply chain disruptions and the environmental impact of copper mining could create some volatility in the copper market going forward, as it has done in the past. The global copper supply chain is indeed far from immune to disruptions. Geopolitical tensions, infrastructure bottlenecks, and unforeseen events like the December 2023 closure of the Cobre Panama mine due to protests over its environmental impact (which contributed over 1% of global production) can all create sudden gaps in supply. These disruptions can lead to price spikes and market volatility, as seen in the record highs reached in May 2024. As copper demand is expected to increase faster than supply, the copper deficit is likely to deepen over the short-term, especially due to artificial intelligence projects. The insatiable appetite of data centres for copper is poised to exacerbate a predicted global copper deficit. According to forecasts by JP Morgan, the additional power consumption required by these digital hubs could expand the projected 4 million metric ton copper deficit by 2030 by a staggering 2.6 million tons. This paints a concerning picture of a market already struggling to keep up with surging demand. Breaking down the impact of data centres, Bank of America estimates a two-pronged attack on copper supplies: direct demand and indirect demand. Data centres themselves are expected to directly consume a significant amount of copper. Estimates suggest a demand of around 200,000 metric tons annually between 2025 and 2028. This copper is needed for intricate wiring within servers, power distribution systems, and cooling infrastructure, as we’ve already explained. The ever-growing power requirements of data centres create a ripple effect. To meet their energy needs, significant investments will be needed in building new power plants and upgrading electricity grids. Bank of America estimates this indirect demand for copper, driven by data centre power consumption, could reach at least 500,000 tons annually. Given the already impending worldwide deficit, the presence of data centres will necessitate inventive measures to address the added strain. Recycling copper, investigating alternative minerals, uncovering new mines, and enhancing mining efficiency will all be vital measures in closing this widening gap between copper demand and supply disparity. Additionally, increasing copper output is not an instantaneous process, but rather a gradual one. The extensive regulatory procedures, environmental factors, and infrastructure establishment linked to the commencement of new mines prevent their rapid deployment to resolve sudden shortages in supply. So, are you ready to take advantage of copper price volatility?

Learn more

Disclaimer:

Disclaimer CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 66% and 83% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. ActivTrades Corp is authorised and regulated by The Securities Commission of the Bahamas. ActivTrades Corp is an international business company registered in the Commonwealth of the Bahamas, registration number 199667 B. The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and as such is to be considered to be a marketing communication. All information has been prepared by ActivTrades (“AT”). The information does not contain a record of AT’s prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not a reliable indicator of future performance. AT provides an execution-only service. Consequently, any person acting on the information provided does so at their own risk.

Publication date:

2024-06-10 14:47:58 (GMT)

The terms and conditions of use set out below (referred to as "FX Blue's Terms"), form a contractual agreement governing FX Blue's relationship with you in relation to your use of this Website (“Agreement”) and you agree to be legally bound by FX Blue's Terms just as if you had signed this Agreement. By using this Website and any Information, you are agreeing to comply with and be bound by FX Blue's Terms, including any revisions that may be made to FX Blue's Terms from time to time. FX Blue reserves the right, in FX Blue's sole discretion, to change, modify, add or remove portions of FX Blue's Terms at any time by posting the revisions on the Website. You should check FX Blue's Terms periodically for changes as by using the Website after FX Blue posts any changes to FX Blue's Terms, you are agreeing to accept those changes, whether or not you have reviewed them, and you waive any right you may have to receive individualised notice of such changes. FX Blue's Terms may be supplemented by additional terms and conditions pertaining to specific content and activities. You agree and understand that such additional terms and conditions are hereby incorporated by reference to FX Blue's Terms. Your continued use of the Website means that you accept any new or modified FX Blue Terms.