Copper trading and their ancillary commodity trading are often referred to as the economic barometer. Copper has a unique set of price dynamics that have a considerable influence on the general economic trends. Widely used across manufacturing and electrical equipment, copper is seeing its demand increase and the price is always on the uptick. It is no exaggeration to say that copper prices determine whether an economy is going into a recession or a boom. Other subtle changes in copper prices are not influenced by the macroeconomic situation. Such fluctuations fall under the category of:
- Supply chain dynamics with the global markets
- Shortages in skilled labour
- Application of protective tariffs
China is the torchbearer in the copper market as it accounts for more than 30% of the total worldwide imports totalling 41 billion dollars as of 2020. Germany is the next in the race with huge high-voltage lines and global construction industry materials.
Forecast for copper prices in 2021: Certain monumental obstacles in the front
This red metal is an unparalleled attraction in the London Metal Exchange Week. All experts attest to its enhanced performance compared to the zinc, aluminium and nickel markets. As per the recent survey, copper experts indicate that copper will stay as the leader in the category of price expectations for 2021. On the global markets, the predicted median price of a ton of copper is $6800 which is an incremental of 125 per cent compared to the average copper prices in 2020.
However, the projected copper prices are not and the same equivalent levels of the present market prices off $7000.
Several factors come into the picture when forecasting copper prices:
1. Bearish sentiment
The supply deficit will slowly go away. According to the global gold technical charts, the worldwide production of copper is increasing. This is definitely due to the new mines that are being constructed in Congo, Russia and other African markets. With the market remaining in deficit, there will be an absence of supply squeeze as was predicted by many naysayers of copper prices in August and September.
Due to the degradation of the global forecast for copper prices by IMF and due to the slow recovery of China, it is expected that the world’s economy will grow to a subdued amount of 5.1 % after the covid-19 pandemic supply-side disruptions that happened in 2020.
2. Bullish sentiment
The alternate situation is a strong demand emanating from China and the same IMF report indicates that China is showing strong sub sectoral growth in the manufacturing sector which will have an optimal influence on the gold technical charts.
The US dollar is showing signs of strain and is losing the confidence of many traders in the long term. Due to the fragile political situation, the economy is showing growing deficits and also a much-skewed labour market due to the socialist policies of the Biden administration.
Electrical vehicles are here to stay and people are showing encouraging signs to go mobile. The stock rallying of Tesla due to its production of low emission cars is on the rise. The demand for copper wiring is increasing as electrical vehicles need tons of copper wiring. The European carmakers are ramping up their copper demand and forecast for copper prices are expected to triple the market capitalization of the manufacturing companies throughout 2021.