Copper price outlook as focus remains on Chinese industrial growth

By: Faith Maina
Faith Maina
Faith strives to break down complex developments so investors can make better informed decisions. When Faith is not immersed… read more.
on Nov 29, 2021
  • Copper price has remained within a horizontal channel for about a month now.
  • The range will remain crucial in the ensuing sessions.
  • Investors have shifted their focus on the Chinese manufacturing PMI expected on Tuesday.

Copper price has remained within a horizontal channel since late October. $4.27 and $4.50 are the lower and upper borders respectively. On the one hand, the Chinese government’s efforts to deal with the property crisis has offered support to the red metal. The easing of energy shortages has also offered some relief. However, slowed economic growth in the Middle Kingdom remains a key bearish factor. As such, the aforementioned range will remain a crucial one in the ensuing sessions.

Chinese economy

China’s slowed economic growth remains a key concern for investors in the copper market. Indeed, it is one of the factors expected to influence the red metal’s price movements in the ensuing sessions. In particular, the focus is on the Middle Kingdom’s manufacturing PMI numbers scheduled for release on Tuesday.

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China is the leading consumer of industrial metals in the world. For instance, it consumes over 50% of all the copper produced globally. As such, its economic growth is a crucial driver of the prices.

Analysts expect the data to signal reduced manufacturing activity. The forecast is founded on the argument that low domestic demand is overshadowing the relief yielded from eased energy shortages. While the predicted manufacturing PMI of 49.7 is higher than October’s 49.2, it would still be lower than the crucial mark of 50.

A figure below 50 usually represents the sector’s contraction. If the presented number matches the analysts’ estimates, this would be the third month in a row that the Chinese manufacturing sector has exhibited low production. Subsequently, it will likely exert pressure on copper price.

The energy crisis that highly impacted the Chinese industrial sector in the past two months is expected to have eased in November. This follows increased output by coal producers; an aspect that has offered some relief for copper price.

However, the ongoing property crisis in the Asian country remains a bearish factor for the red metal that is widely used in construction. Besides, the strong US dollar has contributed to the recent decline. Just like most other commodities, the environment makes copper more expensive for buyers with other currencies. At the time of writing, the dollar index was at $96.34. For close to three weeks, it has held steady above $94.50, which was a crucial resistance level for the index in the previous month.  

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