Copper price: supply is likely to exceed demand – Shaw & Partners

By: Faith Maina
Faith Maina
Faith strives to break down complex developments so investors can make better informed decisions. When Faith is not immersed in the… read more.
on Jun 10, 2021
  • Copper price has surged by 30% year-to-date due to liquidity-driven demand.
  • According to Shaw & Partners, copper supply will eventually exceed demand.
  • The probable disruption of copper supply in Peru and Chile is further supporting prices.

Copper price has surged by about 30% year-to-date. It hit its all-time high of 4.8845 in mid-May before pulling back. Shaw & Partners’ Peter O’Connor has indicated that the prices may soon normalize to below $4.53 per pound ($10,000 per tonne) as the metal’s supply bridges the current gap with demand.

During an interview with CNBC’s Commodity Corner, the analyst stated,

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“copper supply elasticity has been able to cope with growth in copper over the last couple of decades…over the next two or three years, 2023 to 2024, we should see supply exceed demand post this COVID pulse and see prices normalize back to a level below 10,000.”

According to the analyst, the current surge in copper price is largely liquidity-driven. Countries such as the US and China availed hefty stimulus packages with the intent of boosting economic recovery from the coronavirus pandemic. Granted, the proposed US infrastructure spending and growing focus on the green economy has also boosted copper price.

In the short term, copper price is finding support in the probable disruption of the metal’s supply in Chile and Peru. The two Latin American countries are the leading producers of copper in the world. In Peru’s presidential elections, Pedro Castillo is closing in on victory. Castillo has indicated that his administration will take 70% of the returns made by mining firms in the nation’s copper-rich region of Andes. In Chile, the proposed taxing of copper sales is also likely to disrupt supply, thus supporting copper price.  

Copper price technical outlook

Copper price is rebounding after hitting an intraday low of 4.4420. At the time of writing, the red metal was down by 0.89% at 4.4905. On a two-hour chart, it is trading slightly below the 25 and 50-day exponential moving averages.

I expect copper price to experience resistance along the 25-day EMA at 4.5000. Above that resistance level, the next target will be at Wednesday’s high of 4.5395. On the flip side, it may decline to find support at Thursday’s low of 4.4420.

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