Copper Outlook & Market Analysis - Sucden Financial > Metals Outlook > Market Insights

Expert copper market insights

Our quarterly copper outlook is published in our Quarterly Metals Report, which covers base, precious and ferrous metals. The impact of supply and demand fundamentals, including LME and SHFE stocks and macroeconomic implications for the copper futures and spot prices are analysed. Our research team produce a copper price range forecast as part of the report.

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Copper Outlook – Q4 2022

Low inventories and backwardated spreads have kept prices elevated in recent months, if withdrawn, Russian material in the LME system will accentuate the tightness. Destocking across along the value chain and reduced available material, as shown by the low inventories and higher Chinese premiums.

We expect consumption to remain on the back foot in the near term as there was no change in COVID policy from China, the U.S. and Europe will continue to slow. We expect spreads to be volatile, with the dislocated market causing squeezes until more inventory is replenished. Output in China will start to edge higher, presenting a downside to prices. The caveat is if the Fed pivot earlier than we expect, triggering dollar weakness and a rally in risk assets. However, the fundamentals are poor, and the Yuan has weakened 7.3 against the dollar…

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The macroeconomic outlook is deteriorating, and in our view, Europe and the UK are in recession already, and the US will be 6 months behind. Higher interest rates, in conjunction with elevated energy and electricity prices, are squeezing households’ disposable income, and new mortgage rates are considerably higher and are now a fixed cost to the consumer. We expect end-user demand to decline, and this will have an impact across the whole supply-chain; although material availability is poor for metals with bonded and exchange warehouses low in stock, this will lead to a dislocated market and volatile price action in spreads, while the macro impacts the flat price. The 20th Party Congress has ended, and their COVID policy is here to stay. As a result, sentiment in China has declined, and if the output of refined materials rises, this will put further pressure on prices. The Fed has increased the rates by 75bps with 50bps to come, but investors are looking at where they pivot, and any dovish language will cause a selloff in the dollar, giving rise to metals prices. If Chinese demand returns and the dollar weakens, this could present significant volatility and price rises, compounded inflationary pressures.

Q4 2022