Doctor copper indicates economic health recovery, though at a gradual pace.


  • What led to the freefall in copper prices in March 2020?
  • Will lifting of lockdown worldwide provide the required boost to copper prices?


Dr. Copper, being treated as the barometer of economy, had been one of the worst hit commodities due to global lockdown led by Covid-19 outbreak, reflecting the pause in economic activities worldwide. After falling for most of 2019, copper prices had just started rejoicing around the start of 2020 when spread of Coronavirus halted all economic activities and prices began to plummet. The red metal prices began the upward journey in January 2020 when US and China signed the deal (Details in our previous blog : Copper price fell throughout 2019, however, looks promising in 2020) wherein the US agreed to reduce tariffs on some of the Chinese goods while China, in exchange, pledged to buy more of the US goods and services. But this was soon followed by a freefall and copper price dipped to its 3-year low mark in March 2020 as all industries and other economic activities were forced to shut across the world in order to contain the spread of coronavirus.

From the high of US$6,306/tonne on 17th January 2020, it touched a low of US$4,317/tonne on 19th March 2020 (last seen in January 2016).



Coronavirus, after its outbreak in Wuhan, forced China (which accounts for 50% of the global copper consumption) to shut all industrial activities in February and March 2020. The industrial production in China, declined significantly by -13.5% (Y-o-Y) in March 2020. Further, the investment in fixed assets such as power, buildings, roads fell considerably, creating a negative scenario for base metals’ demand and price. The spread of virus across the world soon forced other nations to follow suit and by the end of March 2020, all economic activities across the world were shut. Hence, the demand from metal consuming sectors in Europe and the United States also fell sharply in March 2020. The continuous fall in demand led to stockpiling, particularly in Q1 2020 as copper inventories in Shanghai warehouses and metal exchanges increased by 46% to 955,000 Mt.  As per the data released by the Chilean Copper Commission (Cochilco), inventories of refined copper on the major global exchanges (LME, Comex and Shanghai) have also increased by around 60%.

While demand scenario looked dismal, supply side was equally gloomy. The lockdown across the world, meant copper and other mining activities were also halted and several projects were delayed. Chilean copper mining behemoth, Codelco, reduced its operational activities to adhere to government orders of state emergency. Chile and Peru, which together account for nearly 40% of the global production, halted their mines for around 15 days. Mine production were suspended in countries like Democratic Republic of Congo, Mexico and Zambia as well.

Nonetheless, decline in copper demand due to worldwide lockdown and fear of global recession outweighed the supply constraints and pushed the prices to 3 year low. Its price is however seen recovering in April 2020 as China lifted the lockdown and re-started the economic activities. The Chinese market reopening coupled with government’s stimulus packages announcement to uplift the economy boosted the investors’ confidence and hence, supported the price in April. The continued supply constraints as the rest of the world remained locked down in the month of April also helped push the prices during the month as it breached the US$5,000/tonne mark in April. Since most countries began the unlock process in May, the anticipated improvement in demand has kept the prices afloat in May as well. Hence, copper prices, since April, have been on the upward journey, though the recovery looks slow and prices are seen hovering in the range of US$5000 to US$5,500 per tonne.

Despite this recent recovery in copper prices, most analysts have revised their demand and price forecasts downward for 2020 and 2021 compared to their pre-Covid forecasts. Fitch Ratings, for example, has reduced its copper price forecast from US$5,700 to US$5,300/tonne for 2020 and US$6,000 to US$5,800/tonne for 2021 respectively and expects  global GDP to reduce by 1.9% in 2020 resulting in a significant dent in the global copper demand for the year. Similarly, Cochilco has also reduced its copper price forecast for 2020 from previous predicted value of US$6,280/tonne to US$5,300/tonne.

The opening up of most economies together with increased stimulus from Chinese government is likely to increase copper demand and thus price in H2 2020, particularly compared to the lows witnessed in H1 2020. Nonetheless, this growth is expected to remain slow as the fear of global recession still prevails and the spread of coronavirus has not really been contained.

The supply side, on the other hand, is anticipated to continue to remain under pressure for the rest of the year as the supply disruptions caused by the pandemic is not expected to rebound at the pre-Covid-19 pace. Further, the world’s largest copper-producing country, Chile, apart from the pandemic, is also been facing civil unrest, and hence, its production is vulnerable to disruption from labour disputes as well.

In a nutshell, though the signs of global recession were visible even before the Covid-19 outbreak, however, this pandemic has abruptly paused all industrial activities around the world resulting in severe decline in demand and hence, the price of copper. As the world economy opens up and industrial activities begin, the demand for most metals, including copper is expected to pick up compared to Q1 and Q2 2020, however, this demand recovery is not expected to be in full swing as most countries are expected to restart their economic activities in different phases over time and the fear of global slowdown still looms. While H2 2020 is likely to see gradual increase in demand, any major pick is expected only in 2021. The price of copper, though, is expected to see wide swings as traders and investors weigh on the anticipated increase in demand for the metal, however, the overall weakness in the global economy due to the ongoing effects of Covid-19 is expected to keep the price under pressure for the rest of 2020.


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