Copper prices hit a record high in London this week. Given economic uncertainty in the U.S. and China, the gains may be short lived.
On Thursday, the London Metal Exchange price for a three-month copper contract was down 2.6%, or $287, to $10,897 a metric ton. The decline snapped a six-day winning streak, which culminated Wednesday, when prices hit a record high of $11,188.50. The metal remains up 6% this month, helped by the recent easing of U.S./China trade tensions, as well as recent mining problems that have led to fears of constricted supply.
Copper prices in the U.S., meanwhile, are still about 10% below a record high set in late July. U.S. prices took off earlier this year as speculators began stockpiling the metal of ahead of feared Trump administration tariffs, only to fall sharply when the levies turned out to be milder than expected.
Copper prices are seen as tied to forecasts for global economic growth, given the metal’s industrial uses and its ability to conduct electricity. Wednesday’s rally came as traders anticipated positive results from the trade talks between President Donald Trump and Chinese leader Xi Jinping, breathing a sigh of relief as chances of a trade war that would be destructive to both of the world’s two largest economies seemed to fade.
Unfortunately, while the meeting did bring good news, neither economy is out of the woods.
While the Federal Reserve cut U.S. short-term interest rates for the second time in two months on Wednesday—a positive sign for markets in the short term—investors shouldn’t lose sight of the larger picture. The Fed is cutting rates, despite stubborn inflation, because of tepid consumer sentiment and a worrying slowdown in hiring.
China faces similar uncertainty, with solid headline growth in gross domestic product growth, but persistently weak demand from consumers. The nation’s leaders recently unveiled a five-year plan that prioritizes technology and advanced manufacturing, but its economy continues to struggle from fallout from its property bubble and other problems, such as a lagging birthrate.
Another big factor driving recent copper’s run up has been supply problems, yet concern about that may also be overblown. On Wednesday, the mining company Glencore cut its 2025 output forecast, while earlier in the week, Anglo American warned of production shortfalls at an important mine in Chile. In September, flooding at a Freeport-McMoRan mine in Indonesia killed several workers and led to a lowered production outlook. Shares of all three companies were down about 1% on Thursday.
Despite the problems, fears of a severe supply crunch may not materialize, according to a note Thursday from Goldman Sachs. Any coming shortfalls will likely be “offset by strong scrap exports (in response to a higher copper price) and mine supply growth from marginal producers,” wrote analyst Eoin Dinsmore.
As a result, Goldman says, copper prices may move toward the high end of the current $10,000 to $11,000 range, but “any clear break higher is unlikely to be sustained.”
Copper’s recent record may prove fleeting.
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