BOK: "Rising Copper and Nickel Prices Due to China's Demand Recovery and Tesla Impact"

Bank of Korea 'Overseas Economy Focus'

[Asia Economy Reporter Kim Eunbyeol] Recently, copper and nickel prices have shown an upward trend, supported by the recovery of demand in China and the expected expansion of demand for electric vehicle batteries. Grain prices have also risen due to concerns over crop deterioration caused by adverse weather conditions.

According to the 'Overseas Economic Focus' released by the Bank of Korea on the 27th, the LMEX non-ferrous metals index rose 2.7% compared to the previous month. This is based on the average index increase from the 1st to the 22nd of this month.

Copper prices increased by 3.9% due to expectations of demand recovery in China and inventory reductions. Last month, China's real estate and infrastructure investments are estimated to have increased by 11.8% and 4.0% year-on-year, respectively, indicating a steady rise in metal demand within China.

Copper inventories also decreased. London Metal Exchange copper stocks fell from 89,350 tons (t) at the end of last month to 78,300 t on the 22nd.

Nickel prices rose 3.5%, driven by expectations of rapidly increasing demand for electric vehicles. According to the China Association of Automobile Manufacturers, sales of new energy vehicles (NEV) in China increased by 19.3% year-on-year last month. Tesla recently announced plans at its 'Battery Day' to develop batteries with reduced cobalt content and increased nickel usage.

As global warming causes abnormal weather phenomena worldwide, concerns over crop deterioration have led to rising grain prices. The S&P grain index rose 8.5% on average from the 1st to the 22nd compared to the previous month. Prices of corn (+10.6%) and soybeans (+10.1%) increased notably.

On the 11th, the U.S. Department of Agriculture lowered its 2020/21 U.S. corn and soybean yield forecasts (bushels per acre) by 1.8% and 2.6%, respectively, compared to the August outlook in the World Agricultural Supply and Demand Estimates (WASDE) report. The high temperatures and dry weather in the U.S. Midwest are expected to have an impact. Continued Chinese purchases of U.S. agricultural products, leading to supply shortages, are also driving grain prices upward.

Wheat prices also rose 6.3% due to forecasts of reduced harvests in France caused by adverse weather. France is the largest agricultural country in the European Union (EU). On the 15th, the French Ministry of Agriculture projected that the country's 2020/21 wheat production would decrease by 25.5% compared to the previous year.

This content was produced with the assistance of AI translation services.