Copper price retreats on concern over rate hikes, China demand

Copper produced at the Pinto Valley mine in Arizona. (Image by Jetti Resources).

The copper price retreated on Wednesday on worries about sluggish demand in China and more central bank rate hikes that could curb economic activity.

Copper for delivery in March on the Comex market in New York touched $4.17 per pound ($9,174 per tonne), down 1.2% compared to Tuesday’s closing.

[Click here for an interactive chart of copper prices]

US business activity unexpectedly rebounded to an eight-month high in February, data showed on Tuesday, suggesting the Fed would have to tighten monetary policy more to dampen inflation.

The market was also affected by weak metals demand in China.

“People are also waiting for more visible signs of a demand recovery in China. At the moment, the purchases are mostly on a hand-to-mouth basis,” said Amelia Xiao Fu, head of commodity market strategy at Bank of China International.

“After the recent stock build during the Chinese New Year, which was a bit higher than expected, it takes time to destock.”

China’s total copper consumption would rise around 3.5% in 2023 to 14.6 million tonnes, according to Rosealea Yao, an analyst at consultancy Gavekal Dragonomics.

“That improvement has probably already been priced in by the 6%-10% rise in domestic copper prices since the reopening rally started in early November,” she said in a note.

On Wednesday, the global head of commodities at Goldman Sachs Jeff Currie said commodities are poised to rally in 2023 as China recovers, US inflation proves to be benign, and Russian oil production contracts.

“The real core of the bullish view is the recovery in China,” Currie told Bloomberg TV in an interview.

“And everything is pointing to that being A-OK,”

(With files from Bloomberg and Reuters)