Copper conference in Chile: Critical voices regarding a recovery in demand in China

In the context of the copper conference taking place in Chile this week, critical voices can be heard regarding a recovery in demand in China. In particular, there seem to be doubts that the recent strong consumption will prove sustainable. Economists also point out that an important factor for a sustainable recovery is a strengthening of private sector confidence, which is by no means a foregone conclusion. Not least for this reason, we see only limited upside potential for the copper price in the longer term. Uncertainty about the extent of the recovery in the most important sales market for the metal remains the biggest drag on the copper price in the short term, however.

However, the still very low inventories on the LME are an important price support. These were recently close to an 18-year low. Moreover, at the end of March about half of the inventories were of Russian origin and are therefore likely to be avoided by many Western buyers. Against this background, supply is probably even tighter than the low inventories already suggest. However, there are signs of a recovery in mine production in the important producing countries Chile and Peru this year, so the supply situation should ease. There is also positive news from Chile for the longer-term outlook after the government plans to tighten tax conditions for the mining sector less than planned, which could favour investments in new projects.

Source: Commerzbank Research, Photo: Fotolia