Robust Chinese demand for copper has been boosting metal prices to new highs. Copper rallied on Friday, February 19 to $8,763.40/t, an 8-year high. The metal looks set to extend today’s gains. In our view, the $10,000 target is no longer wishful thinking and may well be reached.
Following the Lunar New Year celebrations, Chinese investors got back to trading in a fairly upbeat mood, as did industrialists and consumers alike. In line with the median consensus, the country’s economy could spearhead the global economic recovery this year, delivering GDP growth of 8% or more. At that rate, the country’s industry will need raw materials, and copper, as a commodity marked by heightened demand sensitivity, reacts proactively to such an outlook.
Copper consumption appears poised for growth not only in China, but also in other Asian economies, including India, as well as the US. Given some challenges in shipping copper concentrate from Chile, the outlook for upside in copper is quite positive.
The technical picture gives us every reason to believe that copper could rally to $9,000/t in the medium term. And if the price holds above $9,200, the long-term target of $10,000 looks achievable.