The copper price was trading at its highest since March 2013 on Tuesday after Chinese data showed manufacturing and construction in the world’s second-largest economy was expanding at a pace not seen in a decade.
On the Comex market, copper for delivery in March jumped 2.4% to $3.5215 a pound ($7,764 a tonne) in New York, racking up its fifth straight day of gains. The copper price has advanced 26% year to date after recovering from a dip below $2.00 a pound at the height of the pandemic in March.
According to Fastmarkets MB, benchmark 62% Fe fines imported into Northern China were changing hands for $132.13 a tonne on Tuesday. That was the highest level for the steelmaking raw material since January 2014 and brings gains for 2020 to over 43%.
Beijing’s official manufacturing PMI for November rose to 52.1 while the Caixin manufacturing PMI, which gives a clearer picture of activity outside large firms and the state-owned sector, jumped to a ten-year high of 54.9.
The construction index was particularly robust, increasing from 59.8 in October to 60.5. A reading above 50 indicates expansion.
Capital Economics said China’s November PMIs were “unreservedly positive” for industrial metals, and the good news was not just confined to the country but showed a significant improvement across Asia:
Buoyant global demand for (metals-intensive) electronics appears to be a key driver of the recent strength, which is reflected in the outperformance of Taiwan and South Korea.
Reuters quotes a recent report by investment bank Goldman Sachs as predicting a return to the “structural bull market” of the 2000s, a period of rapidly rising demand and chronic underinvestment in new supply:
“Covid is already ushering in a new era of policies aimed at social need instead of financial stability [which] will likely create cyclically stronger, more commodity-intensive economic growth, that should create the elusive cyclical upswing in demand.”
And this time the boom would be less dependent on China, which already consumes more than half the world’s industrial metals, but would be boosted by green energy spending in developed markets, says Goldman:
Spending on green infrastructure could be as significant as the BRIC (Brazil-Russia-India-China) investment boom of that decade while the redistributive push in developed markets “is likely to lead to a large boost to consumer spending, comparable to the lending-fuelled consumption increase in the 2000s”.
At the end of that decade commodities peaked at levels way above current prices – iron ore came close to topping $200 a tonne in February 2011 and copper reached $4.58 a pound ($10,097 a tonne) that same month.
Metalbulletin quotes the same report, with Goldman saying the current price strength in copper “is not an irrational aberration,” adding that market deficits through 2023 make it “highly probable” that the bellwether metal will test the record high in the second half of 2022.