While precious metals and commodities have had a difficult year, especially in the second half of 2018, they’ve seen a dramatic surge in price backed by geopolitical news. Copper has just reached a 7-month high today as hopes that an escalating trade war between China and the U.S. can be averted. This rise also carried through into many mining stocks, which saw significant gains as well.
U.S. President Donald Trump said yesterday that he might not increase tariffs on Chinese products on March 1st, the original deadline for a resolution to these trade talks. Previously, the US has had a 10 percent import duty on $200 billion worth of Chinese goods.
However, the rate was scheduled to increase to 25 percent at the beginning of this year before it was postponed. Overall, both sides have said they’ve been making progress, with the newest round of talks scheduled to continue in Washington. The President has mentioned that he may further push back the tariff deadline should talks continue to make progress, something that he reiterated yesterday.
Copper price currently is sitting at $2.9 per pound, a seventh-month high. At the same time, many other commodities have been surging in value as well, with gold hitting a 10-month high recently. Palladium, current the world’s most expensive precious metal, broke the $1,500 price point today setting a historical record.
Copper prices have historically had an uncanny ability to discern global ups and downs, with the industrial metal acting as a canary in the global economic coal mine so to speak. Back in 2016, many expected the markets to tumble, but surging copper prices predicted a Beijing stimulus, as well as a federal reserve postponing rate-hikes, helped turn these expectations around. Now, many look to copper’s surging prices, coupled with the Fed’s current patience as possible signs of a turnaround similar to what was seen three years ago.
However, there are other possible reasons for copper prices to rise. According to a Forbes article entitled “Will 2019 Be the Year of King Copper?”, global demand for the red metal is supposed to grow around 30 percent by 2027. Currently, copper demand sits at 23.6 million tons, with that figure expected to grow up to 30 million tons by 2027 – a 2.6 percent annual growth rate.
Copper imports have increased to 479,000 tonnes in January, the second-highest in history. This has been spurred by new regulations in China encouraging electric vehicle adoption. These, as opposed to regular vehicle manufacturing, use three to four times more copper than traditional internal combustion engines do. China was also responsible for 60 percent of global electric vehicle sales.
Additionally, the growing trend of sustainable energy development in the form of solar and wind. Just as in the case with electric vehicle manufacturing, these renewable energy platforms require many times more copper than traditional energy. Among the fastest growing jobs in America currently are solar panel installers and wind turbine service technicians, further highlighting this trend.
Overall, there are strong geopolitical and economic reasons why copper is going to keep increasing in price. As trade tensions die down and global demand increases, rising prices of the red metal are seen as a good sign for an economic rebound.