These are the possible causes of the big rise in copper prices
Copper has reached in recent months, especially in April, its highest prices for 15 months, reaching €4.02 per kilo. This week’s rise was 1.61% and the monthly rise was 9.05%.
Therefore, in this article we will clarify what have been the possible causes of this increase in the price of copper and how long it will last.
Causes of the rise in copper
This big rise in copper on the London Metal Exchange (LME) is mainly due to concerns about dwindling supply and, consequently, steadily increasing demand. China’s smelters are the main reason why copper supply has been drastically reduced, as some have cut production. Moreover, upcoming regulation could cause Chinese smelters to reduce production by up to 10% by 2024.
On the other hand, the lower availability of copper ore due to mine problems has translated into lower refining rates for several smelters and copper treatment plants, which has also contributed to lower production.
Another point is that demand for copper is also expected to increase sharply in Europe and the United States, as these countries could experience a rebound in industrial and economic recovery, after several months of sluggish activity.
Another cause of copper’s rise is the ecological transition, which is driving copper demand significantly now, as it is a key material in electric vehicles or solar panels.
This casuistry could push the copper sector into a loss-making situation by 2024. Moreover, copper is considered an indicator of the overall economic health of the country, so a rise in its price could mean good news for the overall economy.
Will the copper rally continue?
It is true that copper continues to rise, but one of the uncertainties that persists now is whether and how long it will last. Copper prices move very cyclically, mainly because of the time it takes for a mine to reach production status, which can sometimes take up to 10 years.
It is during this waiting phase that there is a certain backlog in supply and prices can soar accordingly. However, once several mines reach the production phase, supply increases again and prices fall accordingly.