Copper Hits Highest Price in 7 Months... Raw Material Costs Fluctuate Due to China's Reopening

Guri, Copper Price Surpasses $9,000 per Ton After 7 Months
Iron Ore Also Rises 50% Since Last June
"Surpassing $11,500" vs "Temporary Rebound"

[Asia Economy Reporter Kwon Haeyoung] Commodity prices such as copper and iron ore are rising due to expectations of China's 'reopening' (resumption of economic activities), as China is the world's largest consumer of raw materials. Analysts believe that the strength in raw materials, centered on construction materials, will continue as China pours out policies to stimulate the sharply contracted real estate market.

On the 11th (local time), the international copper price briefly surpassed $9,000 per ton on the London Metal Exchange. Copper prices, which fell about 14% last year due to China's COVID-19 lockdowns, surged above $9,000 for the first time since June last year.

China's easing of quarantine measures triggered the rise in construction materials including copper. Market expectations that the U.S. Federal Reserve's (Fed) tightening stance, which has rapidly raised interest rates, will ease around the end of the year have also fueled hopes for an economic rebound and a moderation of the 'King Dollar' (strong dollar), pushing commodity prices higher.

Not only copper but prices of other raw materials such as iron ore and zinc are also showing strength. Iron ore, a key raw material for steelmaking, is trading at around $120 per ton based on the benchmark Qingdao spot price, which is a 50% increase since June last year. The fact that Chinese steel companies, which had low inventories in recent months, are increasing their stockpiles is also seen as a factor that will push iron ore prices higher in the future. Due to this sharp rise in iron ore prices, the stock price of BHP, the world's largest mining company, hit an all-time high on the London Stock Exchange on the 11th. Aluminum prices also rose 10% over the past three trading days based on benchmark prices, and zinc increased by 5% during the same period.

Caroline Bain, a commodities economist at Capital Economics, said, "We expect a rapid rebound in the Chinese economy," adding, "If the momentum of the Chinese economy recovers and the Fed's tightening eases around the end of the year, commodity prices will remain high until the end of the year." Goldman Sachs Group forecasts that copper prices will surpass $11,500 per ton within the year.

There is also an analysis that the expected economic recessions in the U.S. and Europe this year will rather drive an expansion in commodity investment demand. The World Bank (WB) lowered its global economic growth forecast for this year from 3.0% to 1.7%. The U.S. and Eurozone were projected at 0.5% and 0%, respectively, which is 1.9 percentage points lower than previous forecasts. Due to recession concerns, it is expected that the U.S. will find it difficult to continue tightening, and as the King Dollar weakens, commodity investment demand will increase. Colin Hamilton, a commodities analyst at BMO Capital Markets, said, "China is expected to improve, but other countries in the world are expected to worsen," adding, "As a strategy for this, investors are increasing their metal exposure."

On the other hand, some voices express skepticism about the economic outlook due to the surge in COVID-19 cases in China. They point out that the rise in commodity prices such as copper and iron ore may be only a short-term rebound. According to Australian investment bank Macquarie Group, new construction in China's real estate sector, which drives commodity demand, is at its lowest level in the past decade. Marcus Garvey, Macquarie's head of metals and commodities strategy, analyzed, "The construction sector (in China) is very vulnerable," and questioned, "How much improvement there will be in the new construction sector is uncertain."

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