Thursday , May 6 2021

Rising copper prices suggest a strong economic recovery is under way



Copper, a traditional, centuries-old medicine for good health, has also remained a significant indicator of economic health. Rising copper prices, fueled by strong flow of orders, indicate that the global economy is recovering rapidly.

Copper prices are recovering from the easing of restrictions imposed to limit the spread of the coronavirus. As vaccine developments have accelerated, copper prices have now risen to perennial highs. Copper prices on the London Metal Exchange not only gained over 18% from the lowest falls in October, but are almost 65% higher than the trough in March. Rising copper prices are not aberrant, but driven by strong demand, especially from China, the world’s largest consumer of goods. “The Chinese mainland market has tightened faster than we previously expected, driven by exceptional trends in high demand in the second half,” said analysts at Goldman Sachs International. The former Chinese refined copper market has also collapsed, as Western recovery has seen analysts demand.

As demand recovery supports copper prices, analysts expect momentum to continue. Goldman Sachs International predicts a further rise in copper prices to US $ 10,000 per tonne by 2022, from current levels of just over US $ 7,600.

Increasing prices

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Increasing prices

Even crude oil is starting to gain momentum after being tied to the range for months and there may be room for more benefits, analysts say. Rising prices for steel, iron ore and coal, as well as other industrial products, suggest a recovery in the global manufacturing sector.

Among the other economic indicators that are often mentioned is the gold-silver ratio. Gold, favored as a safe haven amid uncertainties surrounding the Covid-19 pandemic, has now begun to see corrections, with a flurry of vaccine-related news. Silver will be the preferred commodity and this could also mean that an industrial turnaround is expected, experts say.

However, it may be a little premature to conclude on the strength of the recovery, especially as high liquidity raises asset prices around the world. “A weaker dollar and a stronger Chinese currency are conducive to inflation in metal prices and Chinese stocking ahead of the Chinese New Year ceremony may also be a reason for commodity prices,” said Nitin Bahasin, head of research at Ambit Capital. “.

In India, while many sectors have returned sharply, some sectors are still lagging behind. Important levers for economic growth, such as job creation, depend on investment. The private cloak remains delayed, while government investment is slow. In terms of gross domestic product, although FY22 will see a strong jump on a low basis, full normalization is expected only for FY23.

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