Copper picks up after sinking to lowest point in three years
Economic stimulus and hope of Chinese recovery buoys the metal
The price of copper has risen slightly after slumping to its lowest point in three years amid Monday’s market-wide oil panic.
By mid-afternoon trading three-month copper on the London Metal Exchange (LME) had surpassed $5,600, a more than 1 per cent rise.
After Saudi Arabia started a price war with Russia by flooding the oil market, the key commodity fell by more than 30 per cent. As a result of this plunge, stock markets in both the US and Europe suffered their largest one-day drop since the 2008 financial crisis.
Three-month LME copper fell by up to 2 per cent to as low as $5,494 a tonne, its lowest level since May 2017.
The expectation of imminent economic stimulus on both sides of the Atlantic explains in part copper’s Tuesday rebound. However, developments in China are arguably more important.
Due to its elasticity and conductivity, copper is an essential element used in the production of electronic equipment and motors. The significant spread of the coronavirus in China and the subsequent large-scale shutdowns have reduced demand for the metal.
However, with the number of new cases sharply declining and the Chinese population getting back to work, demand is expected to pick up. China’s semi-fabricator sector, which processes copper into wire-rod or tubes to be used in other industries, has seen its utilisation rate gain from 40-50 per cent a week ago to up to 60 per cent.
President Xi Jinping’s first visit to Wuhan, the epicentre of the outbreak, is meant to instill confidence not only in the Chinese people but the wider markets themselves.
Markets have seemingly been instilled, with the most-traded copper contract on the Shanghai Futures Exchange (ShFE) rising by more than 1 per cent from a multi-year low.
Nickel prices have also gained, with three-month LME nickel up as much as 2.7 per cent and the most-traded nickel contract on the ShFE up by more than 4 per cent.
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