Copper price continued its remarkable bull run this week, making it one of the best-performing metals this year. It has jumped to $4.5, its highest point in over two years. It jumped for four straight days and by over 120% from its lowest point in March 2020. Notably, copper has risen for five straight week, the first time it happened since 2020.
Manufacturing activity is recoveringThe price of copper is jumping because of the rising manufacturing activity around the world. A report by ISM showed that the US manufacturing PMI rose to 52 in March, the first time that happened in over two years.
The same trend is happening in other countries. In China, the biggest manufacturer in the world, saw its PMI jump to 50.8, signalling that the activity is doing well. A recent report also showed that China’s industrial production jumped by 5.3% in March.
Analysts believe that this recovery will continue in the coming years as demand of clean energy items rise. Most reports estimate that the copper industry will remain in a deficit because of the rising demand.
Copper supply problemsThe other reason why copper price is soaring is the ongoing supply challenges. Just last week, the Biden administration rejected a 211-mile industrial road in Alaska that would have helped turn the state into the biggest copper project in the US. The road would have cost the company $7.5 billion.
This Alaska project is not the only one facing permitting headwinds many copper projects around the world. Studies show that most new mines take over a decade conducting permitting and environmental impact assessment (EIA) studies.
Another example is a $10 billion mine in Panama, which was cancelled this month, costing First Quantum billions of dollars. The Cobre Panama mine was expected to bring over $10 billion in revenue and was supposed to account for between 4% and 5% of the country’s GDP.
At the same time, most of the copper mines in existence today are from aging mines, which are costly to produce. A good example of this is Chile’s biggest mine, which is producing below 250k metric tons today compared to over 500k in 2010.
Other companies in Chile, including Teck Resources, have seen the cost of mining jump, leading to lower production.
Meanwhile, the price of copper has surged because of the rising inflation around the world. Other commodities like crude oil, gold, silver, and platinum have also jumped sharply in the past few months.
These commodities are seen as hedges against inflation since their prices rise when inflation is rising.
Copper price forecast
The price of copper has jumped sharply in the past few weeks. Its price has risen for five weeks straight, moving to its highest level since April 2022. The price has jumped above the crucial resistance at $4.35, its highest swing in January 2023.
It has also formed a cup and handle pattern, which is usually a bullish sign. Copper has also jumped above the 50-week moving average and the 23.6% Fibonacci Retracement level. Therefore, the outlook for copper is bullish, with the next point to watch being at $5, the highest swing in March 2022.
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