![]() ![]() While some hoped for a more aggressive fall, the Consumer Price Index fell 0.1% in December, marking the sixth consecutive month of declines. dollar index, which has an inverse correlation with commodity prices, now sits at its lowest point since June.Īlso, slowing inflation numbers continued to weigh on the U.S. dollar has added further support to the copper market. Should declines continue and demand see limited recovery, it could trigger a strong pullback in the country’s copper market. China’s aging population will add yet another layer of difficulty to the recovery as many wonder who else is left to build for in the future? The construction industry has historically served as one of the largest consumers of China’s overall copper demand. Q4 of 2022 marked the sixth consecutive quarter of year-over-year declines in housing sales.Īccording to the China Construction Machinery Association, excavator sales in China, a proxy for construction activity, saw a 23.8% decline. This shift helped ease debt constraints on developers, but the industry remains in decline. The most recent was a move away from the “three red lines” policy. Of course, China has made continued efforts to support the sector. For one, the construction sector remains weak amid the ongoing property crisis. When China finally does find itself on the other side of the pandemic, many other problems await. Copper Market: Future Issues Waiting for China Furthermore, overall uncertainty related to China’s recovery and the continued threat of COVID-related disruptions will increase the likelihood of volatility. That is more than ample time for markets to potentially over-speculate. Still, this means we won’t see the true extent of post-zero-COVID Chinese demand until Q2. Of course, recoveries in major cities will have a larger impact on markets than in rural areas. It is time to focus on rural areas.” This could indicate China is still two to three months away from its countrywide peak. Zeng Guang, former chief epidemiologist at the Chinese Center for Disease Control and Prevention, warned, “our priority focus has been on the large cities. While numbers appear to have peaked in some areas, China’s latest COVID wave is not over. Downside Risk: Rural Cities Next, Construction Sector Remains Weak This brings them to their highest level since June. Already, during the first two weeks of the year, copper prices jumped over 7%. In a recent Financial Times article, Caroline Bain, commodities economist at Capital Economics, noted “we are expecting a rapid rebound in China’s economy.” Bain is not alone in her sentiment. While Chinese demand has not necessarily “recovered,” markets appear optimistic. Now, as major cities near and pass their COVID peaks, copper prices again appear decidedly bullish. However, the copper market started moving sideways again in December as surging infection rates continued to disrupt economic activity. Throughout November, the dismantling of China’s zero-COVID policies saw copper prices rise over 3% for the first time since March. ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |