(3-minute read)  | 

Copper prices have just decisively broken above the $4 handle after falling in the second half of 2022 due to tightening fears and China being in lockdown. 

Prior to this, Copper prices traded vertically following the massive liquidity injection in 2020 and stalled in 2021. The $4 level is significant as it was a strong support throughout 2021 and into the first half of 2022.

With the recent reopening of China and a change in market expectations of future interest rates, Copper has started to trend upwards again, and Copper mining equities are following suit.

Sentiment remains muddled due to high expectations of a recession in 2023 and 2024, but this could potentially be a star trade this year if recession fears lessen and the Chinese economy outperforms expectations.

In the long run, Copper demand is expected to remain rock-solid as electrification of the grid all over the world will require a large amount of the metal. 

As it is, the current electrical grid for almost all modern cities does not have the capacity to support a 100% transition to electric vehicles – the load on the wires will simply cause it to burn out.

The high population growth of third-world countries like India, Indonesia and Pakistan will continue to be a headwind for Copper as long as interest rates remain low to spur these countries to increase fiscal spending on infrastructure.

We are bullish on Copper’s long term trajectory and will be watching it very closely in the months ahead.