Copper is an important metal in
the world. Every day, billions of people indirectly use products that are made
with copper. For example, copper is found in automobiles and in electrical
appliances. It is also used to power the national grids of all countries. This
happens because of copper’s excellent conduction capabilities. As such, copper
is used by investors as a gauge of the economic growth. As the talks between
the United States and China continues, investors see an opportunity in the
copper market. The demand for copper is expected to rise from 23.6 million tons
in 2018 to more than 30 million in 2027.
The reason for this is that the
world’s economy is improving. There is also some rotation into clean energy.
This is because the new energy sources like wind and solar require more copper
than the traditional power sources. The same is true with automobiles. Electric
vehicles consume more power than those powered by oil. Most of this demand might
come from China, which is responsible for 60% of global electric vehicle sales.
In the next ten years, Asia is forecasted to account for 40% of the global EV
market. Europe and the United States may likely follow.
The Chinese government has put in
place major subsidies for the electric vehicle manufacturers. These
manufacturers are also incentivized to manufacture the vehicles in the New
Energy Vehicle credit system. This is because China wants to have a big
automobile industry, similar to Western countries and Japan. Last week, JP
Morgan released a report in which it was hawkish on copper and Freeport
McMoran, the biggest copper mining company.
In response to the ongoing trade
talks, the price of copper has continued moving higher and has reached the
highest level since July 2018. The $2.88 price is above the 20-day moving
average channel, while the RSI has reached the overbought price of 70. There is
a likelihood that the price may continue moving higher, although this could
change if a trade deal between China and the US fails.