CSCCF - Copper price rally hangs on hopes for substantial China stimulus

2023-08-01 11:55:54 ET

Copper prices dropped Tuesday from a three-month high after Chinese manufacturing data contracted in July, following a 6% surge last month on hopes that China would launch more economic stimulus measures.

Three-month copper on the London Metal Exchange closed Monday at $8,836/metric ton ( HG1:COM ), its highest level since April 20 and a 4% rise during the last two weeks of July, but analysts say the rally may not last if China's support measures fall short of expectations.

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Analysts are expecting more stimulus ahead, especially for construction, but the measures may not go far enough to sustain a rally in prices.

"Our core view remains that policy will be progressively more supportive (rather than a big bang) but ultimately prove insufficient to drive a rapid re-acceleration in industrial and construction activity," Macquarie's Alice Fox said.

But Goldman Sachs last week noted copper's importance in the energy transition, raising its three-month price target to $9,250/ton from $7,750/ton and its six-month target to $9,500/ton from $9,200/ton.

Analysts at Standard Chartered expect near-term copper prices will remain sensitive to macro data flow with U.S. dollar moves, China stimulus expectations and risk appetite driving prices.

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