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Copper Six Months Into 2021: The Good, The Bad, The Uncertain

Copper Six Months Into 2021: The Good, The Bad, The Uncertain

Depending on the angle want to look at it, the price of copper in 2021 could either be good or bad. Or uncertain.

The Good

There appears to be some short-term stability. After months of price charts that looked like an Olympic athletes’ heart monitor test, the price chart over the past 60 days is flattening out.

After reaching a record high price in early May, copper prices per pound actually ended June lower than its price on May 1 by nearly 30 cents a pound. Following the early May spike, prices stayed between $4.50 and $4.25 a pound, before settling on June 30 at $4.23. The stretch for the second quarter of 2021 from April 1 through June 30 is actually the smallest quarterly gain (based on percentage) since March of 2020.

The Bad

2021 has not been kind to the price of copper. We started the year with prices at what some would consider a fairly high $3.51 a pound. By early February, it was above $4 a pound, and by May 10 had reached record high $4.80 a pound.

At that point, there were concerns about supply due to an ongoing strike by workers at the world’s largest copper mine in South America, and talk about copper prices reaching $9 a pound by the end of 2022.

China decided to try and manipulate the copper market by releasing an unknown amount of copper from its reserves to stabilize the price, which had some impact during the month of June.

But if you look at the price of copper from the beginning of 2021 to today, you would be looking at a 75 cents a pound increase in price.

And if you look at the price of copper over the past 365 days, you will find an increase of nearly $1.50 a pound, which is a 55% increase from July 1 2020 to July 1 2021.

The Uncertain

Will demand continue to increase as green energy initiatives take hold not only in the United States but around the world?

Will China continue to try to manipulate the market, or increase its demand for copper? Will the rest of the world pick up the slack if China pulls back on its copper use?

Will the ongoing labor dispute in Chile have a significant impact on the world’s supply, which could have result in more price spikes? We know companies had under-invested in copper mining over the past few years as other commodities appeared more attractive. Will that mean an ongoing shortage?

Are we still on track to see copper prices edge toward $9 a pound throughout the rest of the decade?

If you search for analysts on copper, you will find everything from “Copper is the new oil” from Goldman Sachs to JP Morgan seeing continued declines in price through next year. If you take the average for a consensus forecast, look for prices to remain flat in the third quarter of this year and then slide down slightly in the fourth quarter.

 

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