Copper prices experienced a boost on Wednesday, driven by optimism regarding possible U.S. interest rate cuts and the effects of a strike at Chile’s Escondida mine, the largest copper mine globally. The 3-month copper contract on the London Metal Exchange rose by 0.8%, reaching $9,026 per metric ton, reversing the previous month’s dip below the $9,000/ton mark. This increase reflects market anticipation that the U.S. Federal Reserve might pivot from its focus on curbing inflation to fostering economic growth, a sentiment encouraged by unexpectedly weak U.S. producer price data. Investors are hopeful that cooling inflation could lead to rate reductions, further supported by a decline in the U.S. dollar index, which made copper more accessible to international buyers.
However, these gains were moderated by concerns over China’s economic health, especially following data showing that July’s bank lending in China was the lowest in almost 15 years, raising fears of a prolonged economic downturn that could dampen demand for metals. Adding to the complexity, a significant strike at the Escondida mine, organised by a powerful workers’ union, has contributed to the upward trend in copper prices, as the strikers seek a greater share of the mine’s profits. Although the strike’s impact on prices has been limited by weak Chinese demand and hopes for a swift resolution, the situation could escalate if the strike persists.
Market sentiment remains optimistic, with forecasts suggesting that copper prices could surpass $4.10 per pound, potentially reaching $4.14 per pound by the end of the quarter according to Trading Economics. The ongoing negotiations between BHP and the union will play a crucial role in determining the future of the global copper market, especially considering the essential role of mining in the global copper supply, where nearly 90% of the world’s copper is mined rather than recycled.
In addition to copper, other base metals also saw positive movements, with LME aluminium rising by 1.2%, zinc by 1.5%, lead by 0.9%, and tin by 0.9%. Nickel, however, saw a slight decrease of 0.1%. As the strike continues and potential changes in U.S. monetary policy unfold, these factors are expected to significantly influence the direction of the global copper market in the coming weeks. Investors are likely to monitor these developments closely, particularly as copper remains a vital material in the pursuit of global net-zero targets.
Jubilee Metals Group plc (LON:JLP) is a diversified metal recovery business with a world-class portfolio of projects in South Africa and Zambia. The Company’s expanding multi-project portfolio across South Africa and Zambia provides exposure to a broad commodity basket including Platinum Group Metals, chrome, lead, zinc, vanadium, copper and cobalt.
