Copper (COPPERUSMAY22), the so-called king of green metals, continues to enjoy some tailwind from other industrial metals. Most recently zinc where the threat of shortages, especially in Europe where LME stocks are critically low, have seen the price move higher. Copper did trade near a one-month high earlier in the week after Chile, the world’s largest producer of the metal, reported a 7% year-on-year decline to 399,817 tons in February, this following a drop of 7.5% year-on-year in January.
While a tight supply outlook and the green transformation will continue to underpin prices over the coming months, the market currently has to deal with negative developments in China where draconian lockdown measures to combat covid outbreaks are likely to weaken the growth outlook by more than the government had originally forecast. Once the covid cloud has lifted, the Chinese government is likely to step in with additional measures to stimulate growth and that should help off-set the impact of lower growth elsewhere caused by high prices and accelerated tightening from the US Federal Reserve.
After reaching a record high above $5 per pound last month, HG copper traded back to $4.5 per pound before moving higher again. The outlook for copper remains supportive with tight supply offsetting the risk of an economic slowdown. We maintain this bullish view as long the price remains above the 200-day moving average, currently at $4.41 per pound.