Copper prices followed China’s pace of growth, which rebounded in the second half of 2020 and the first half of 2021.Ĭopper prices have risen 125% from their March 2020 lows and have been among the commodities that have reached record high prices since the pandemic began.Slower copper production in recent years has led to a shortage with demand rising.Whether China can manage its vulnerabilities and both fund and execute enough projects to compensate for the weight of the global economic downturn appears, at this point, unlikely. Even if they fall short of city-wide lockdowns, they come at the expense of a larger recovery and remain disruptive to any business or project. China’s current covid restrictions also pose a risk. This, on top of its property sector and the damage already done by the zero-COVID approach, leaves China in a much weaker position. Further, China’s debt sits much higher than it did in 2008. Projects announced thus far will certainly benefit copper, but it remains unclear how total spending will compare to 2008.
Copper prices likewise took note as the downtrend hit a bottom by December.Ĭhina’s efforts may not have the same effect in 2022, however. While the package expanded the debt, it also spurred growth following a sharp dip. Back in 2008 amid the Great Recession, China’s State Council announced a $586 billion (CNY 4 trillion) stimulus package in November of 2008. It’s also not the first time China used this strategy. While China’s stimulus measures extend beyond infrastructure, infrastructure spending appears as the priority. Will China’s Infrastructure Push Halt Copper Price Fluctuations? Total planned investment in newly started projects rose by 23.3% during that same period. According to data from the National Bureau of Statistics, infrastructure investment during the first five months of the year increased by 6.7% from 2021. Upcoming plans follow already sizable investments during the first half. It will also issue nearly $45 billion in financial bonds. To fund its ambitions, China’s cabinet announced it would raise the credit quota for policy banks by $120 billion. China looks toward building its digital economy as well. While projects will likely be expansive, Xi emphasized “sci-tech” infrastructure. Its latest moves follow President Xi’s late-April commitment for an “all-out” strengthening of infrastructure construction. According to a recent Reuters report, China will create a state infrastructure investment fund totaling nearly $75 billion in Q3.
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However, any backtracking could accelerate the current free fall in prices that now sit nearly 30% beneath their March 7 peak.Īs China weighs its next steps to manage COVID, it continues to look toward infrastructure to reach growth targets. China’s recovery has, thus far, failed to reverse the downward momentum. However, bearish focus shifted growing fears of an economic recession in the West. However, it failed to overtake its previous high as Shanghai emerged from lockdowns. The price descent continued following a brief rebound. The impact of China’s lockdowns started taking effect during the second half of April. While copper prices peaked in March, muted demand from China triggered the beginning of the price downtrend. Related: The EU Is Prepping Another Round Of Sanctions Against Russia This is contrary to any number the CCP will release. Furthermore, a recent Bloomberg report suggests that China’s GDP likely contracted in Q2. The Caixin Manufacturing Index PMI contracted to a 26-month low in April. The last lockdown caused extensive damage to China’s economy. However, another lockdown could remain on the horizon should infection counts surpass a certain threshold. The apparent hesitation suggests a subtle shift in China’s strategy. Up to this point, China has resisted another full-scale lockdown. The latest jump in cases will once again test China’s resolve for zero-COVID. Since Shanghai emerged from lockdown, China shifted toward targeted quarantines.
The city continues to struggle with the omicron variant. Meanwhile, Shanghai’s covid cases rose to their highest level since late May. The highly infectious BA.5.2 sub-variant of the coronavirus arrived in China as Beijing issued its first vaccine mandate. Spike in COVID Cases Puts China’s Recovery in Limbo and Affects Copper Prices This leaves industrial buyers at risk of inventory value fluctuations. The continuous breakdown of short-term trading ranges fosters a volatile market. Copper price action continues to show massive bear trends and signals further declines.
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