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Informist, Thursday, Jan. 16, 2025

 

By Ashutosh Pati

 

MUMBAI – Copper prices have gained almost 5% on the Multi Commodity Exchange of India and the London Metal Exchange since the beginning of 2025 and are expected to rise further because of renewed optimism over fresh fiscal stimulus from China and improved market sentiments, analysts said. Copper contracts have gained for four consecutive sessions on the domestic bourse because of signs of potential improvement in Chinese demand, they said.

 

China's trade surplus rose to $104.8 billion in December, with exports rising 10.7% on-year, beating market expectations. "December's (trade) data likely benefited from some export front-loading ahead of US President-elect Donald Trump's inauguration this month," Lynn Song, chief economist, Greater China at ING Think said in a report.

 

Imports into China saw a more modest growth of 1% on-year in December, recovering from a 3.9?cline in the previous month. "China's consumption could see a modest recovery in 2025, depending on how effective policy support is, but it remains uncertain how much of this will translate into stronger import demand as policies look likely to benefit domestic producers more," Song said.

 

Copper product imports to the country rose by a hefty 21.8% on-year to 602,000 tonnes, the highest since October 2020. The commodity imports in December remained relatively strong, reflecting the modest improvement in manufacturing activity in the last quarter of 2024, analysts at ANZ Research said in a report.

 

Although the country's official manufacturing PMI fell to 50.1 in December from 50.3 in November, it still remained in expansion territory. A reading above 50 in PMI indicates expansion in the manufacturing sector.

 

"The monetary and fiscal stimulus from China and expectations of additional stimulus from the country have boosted prices in the short term," said Sriram Iyer, senior research analyst at Reliance Securities. "Prices were also extremely oversold as a lot of sellers who were extremely short have also covered their positions," Iyer added.

 

China's President Xi Jinping, in his New Year's Day speech, indicated that the country's GDP would exceed 130 trillion yuan ($17.7 trillion) in 2024, on track to hit the target of 5% growth and pledged more proactive economic policies to promote growth in 2025.

 

Copper prices could get further support this month because of higher demand before the Chinese new year, said Ajay Kedia, director at Kedia Capital. The Chinese New Year or the Lunar New Year starts on Jan. 29. An early Lunar New Year this year may also be prompting early buying, Daniel Hynes, senior commodity strategist at ANZ Research said in a note.

 

Meanwhile, market participants remain wary about the potential tariffs that the US President-elect Donald Trump might impose on China in his second term. Trump's proposed tariffs are expected to ignite another global trade war, which could hinder growth in demand in key consumers such as China. However, the Trump Administration is said to be considering slowly ramping up trade tariffs, rather than imposing sizeable levels from day one, Hynes said.

 

Kedia expects copper prices to reach INR 856 per kg on the domestic bourse by the end of this month. At 1852 IST, the most-traded copper contract on the Multi Commodity Exchange of India was at INR 836.50 per kg, up 0.5% from Wednesday's close. Iyer, on the other hand, said that some consolidation could be seen because the prices are trading at resistance levels. "I think INR 830 per kg will be the level to watch out for. If that level is taken out, then I think further upside towards INR 860 per kg can be seen," Iyer added.

 

Manoj Jain, director of Prithvi Finmart, expects copper prices to touch INR 850 per kg on the MCX and $9,300 per tonne on the London Metal Exchange by the end of this month. At 1852 IST, the three-month copper contract on the LME was at $9,216.5 per tonne, up 0.7% from the previous close.

 

However, in the long term, copper prices could remain under pressure as the market is expected to be in a surplus this year. The copper market was in a surplus of 287,000 tonnes in the first ten months of 2024, compared to a surplus of 9,000 tonnes in the corresponding period in 2023, according to the International Copper Study Group. In October 2024, global production of refined copper rose 3.7% on-month to 2.30 million tonnes, while consumption fell 0.6% to 2.34 million tonnes. The deficit in the copper market in October narrowed to 41,000 tonnes from 136,000 tonnes in the previous month. ICICI Direct expects the refined copper market to remain at a surplus of 194,000 tonnes this year due to the ramp-up of new smelters and refineries in India and Indonesia.  End

 

US$1 = INR 86.54

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Saji George Titus

 

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