The copper price rose to a six-week high on Thursday as the US inflation rate eased and its dollar weakened.
Copper for delivery in September nudged $US3.70 per pound ($US8154 per tonne) on the Comex market and was trading at $US3.69 per pound at the time of writing (9:30am AEST, August 12).
A weaker US dollar means dollar-priced metals are cheaper for buyers with other currencies, driving up demand in the process.
“The peak inflation thesis is pushing base metals up,” Gianclaudio Torlizzi, partner at consultants T-Commodity, said.
Torlizzi said there were also signs of tight supply in China, with potential for the price to move up further.
The development comes after the copper price slumped to a 20-month low in early July with copper for delivery in September teetering above $US3.40 per pound on the Comex market.
“The declines can be attributed to fears of new restrictions in Shanghai and Macau that could dampen growth,” SPI Asset Management managing partner Stephen Innes told The Economic Times in July.
“We are caught in the negative feedback loop of Fed rate hikes and COVID risks in China.”
Much of China’s population continues to endure strict COVID-19 restrictions as part of its COVID-zero policy.
Several Chinese cities imposed fresh restrictions on Thursday to quell COVID flare-ups, which includes reducing people’s unnecessary movement for a few days – a softer type of lockdown.
And if factories aren’t open due to restrictions or a lockdown, demand for copper drops and the price declines with it.
Despite the situation in China, there is still strong optimism for copper’s long-term outlook given the base metal’s importance in the renewable energy transition.
In November 2021, S&P Global Market Intelligence forecast global copper demand from solar and wind energy generation to reach 852,000 tonnes in 2022, with electric vehicles accounting for 1.1 million tonnes of demand.