'Dr. Copper' Copper Prices Rise Again

Economic Recovery Momentum, Expectations for Expanded Infrastructure Investment

[Asia Economy Reporter Minji Lee] Copper prices, which had been stagnant due to decreased demand from China, are showing an upward trend again. This is interpreted as reflecting expectations that supply will not increase as much as demand due to large-scale infrastructure investments in the US and China.

According to the London Metal Exchange (LME) on the 23rd, copper recorded $9,475.50 per ton the previous day, rising about 7% this month alone. Although prices fell about 4% over the past month, they have resumed an upward trend this month.

The reason copper prices are rising again is that as the economy enters a recovery phase, expectations that demand will significantly increase due to expanded infrastructure investments in various countries are being reflected. Copper is called 'Doctor Copper' because it can predict economic conditions. In the second half of last year, as the development of COVID-19 vaccines accelerated and economic recovery expectations expanded, prices continued to rally. Since the COVID-19 pandemic began in March last year, copper prices have risen about 90%. This reflects the growing economic recovery expectations centered on China, the largest consumer. Last month, due to stabilized supply from producers and decreased demand from China, prices hovered around the $9,000 level for a long period.

Industry insiders expect copper prices to surpass the all-time high of $9,617 per ton recorded in February. China, which had raised concerns about demand decline due to lower-than-expected economic growth rates, is taking an active stance on infrastructure investment, and the US Biden administration's massive infrastructure stimulus plan is expected to significantly increase demand. In the new renewable growth phase led by the Biden administration, copper is expected to see a large increase in demand as it is used in electric vehicles as well as solar and wind power. Additionally, demand for building smart cities is also supporting price increases. According to the International Copper Association, global copper demand is expected to nearly double by 2025 compared to 2019 due to the establishment of smart city technologies.

From the supply side, it is also expected to be tight to meet the increased demand. Hwang Byung-jin, a researcher at NH Investment & Securities, said, "Although production improvements are expected in Latin American mines such as Chile and Peru after the COVID-19 situation ends, copper has had poor capital investment since 2014, so there is no new production capacity, and the supply shortage situation will continue."

As copper prices rise sharply, related stocks and the returns of related products are also attracting attention. The ‘Shinhan Leverage Copper Futures Exchange-Traded Note (ETN)’, which earned 200% returns over one year, has risen about 10% this month. The ‘KODEX Copper Futures’ Exchange-Traded Fund (ETF), which follows an index based on copper futures prices traded on the New York Mercantile Exchange, has also risen about 7% this month. Poongsan, which produces copper alloys using high-purity copper, has risen about 6% this month.