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China US Trade Tensions Pressuring Copper Price Outlook

Metal News - Published on Wed, 11 Dec 2019

Image Source: Copper Prices
Fitch Solutions analysts in a report this week said that copper prices in 2020 are expected to suffer from ongoing macroeconomic concerns and weak market sentiment as a result of sustained trade tensions between the US and China. Fitch forecast copper prices to average USD 5,700 in 2020, down from USD 6,000 in 2019, citing recent sideways trading between USD 5,800 and USD 6,000 that has fluctuated based on political developments. Fitch said "An announcement in early November that the US and China were working towards a phase one trade deal pushed prices slightly higher, before renewed threat of additional tariffs on China by US President Donald Trump then did away with any momentum gained,. More recently the US Senate's passing of the 'Hong Kong Human Rights and Democracy Act on November 19 put downward pressure on prices, before positive rhetoric from Donald Trump on the potential for progress on trade talks in early December once again pushed prices higher. In addition to US China trade tensions, fears of a global economic recession are expected to hurt overall metals pricing. Lingering fears of the global economy falling into recession over the coming months will continue to house poor sentiment for metals, which should keep a lid on prices.”

Fitch revised China's 2019 real GDP growth forecast down to 6.1% from 6.3% and expects GDP to fall to 5.9% in 2020. The slow growth is attributable to the nation's poorly performing automobile, electrical and machinery industries.
Fitch said “Key metal-intensive segments in China are expected to continue stagnant trends as the country's economic growth slows from the international trade dispute. Over 2020, we forecast vehicle production and sales growth in China to remain stagnant while demand from the power sector will also slow," Fitch said. As a result, we expect demand for a number of metals used in these sectors, primarily aluminum and copper, to remain weak."

As Chinese copper consumption struggles, Fitch forecasts a 36,600 tonnes copper market surplus in 2020, up from 15,300 tonnes in 2019. Fitch expects global copper production to slow down to keep the market in undersupply through 2027 as consumption growth levels decline over the next 10 years and the undersupply will create a deficit in the copper market beyond 2021 that should stimulate price recovery up to 2023.

China accounted for 51% of world refined copper usage in 2018

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Posted By : Yogender Pancholi on Wed, 11 Dec 2019
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