The global factors that will push down copper's price in 2023

The economic slowdown in China, tight monetary policy in the US to control inflation, and potential recessions in European countries will be key factors for the expected drop in the copper price in 2023.

The price will range between US$3.95/lb and US$3.2/lb, reaching an average of US$3.7/lb compared to an estimated US$3.98/lb at the end of this year, Chile's state copper commission Cochilco said in its latest market trends report.

“The risks and external scenario in 2023 will put downward pressure on the price of copper. Low growth in China and protests against the 'zero COVID policy' have been generating a higher supply for the price of the red metal," Nataly Venegas, senior analyst and business developer for Latin America at consultancy FXGlobe, told BNamericas.

"Chile exports 32% of its copper to China, so everything that happens in the Asian country directly impacts the price."

The price was volatile this year with an average of US$4.53/lb in Q1 and a high of US$4.87/lb in March, then it fell to an average US$3.5/lb in Q3 and reached its lowest level in July at US$3.18/lb in July, Cochilco said.

Next year the price will be impacted by imbalances in supply and demand.

"There's a projection for a supply of refined copper (mine production and scrap) of 26Mt, up 3.9% on the previous year, while demand would reach 25.6Mt, an increase of 2.4% from 2022. This will generate a market surplus of 318,000t of copper, which will push the price down to an average of US$3.5/lb in 2023,” Venegas said.

China's restrictive measures to control its COVID-19 outbreaks, the crisis in its real estate and industrial sectors, and the turbulence in international markets have created uncertainty about the Asian economy in 2022.

“The European scenario does not bode well for 2023. In the last rate meeting held by the ECB, they projected rate hikes of 0.5 basis points for the coming months. That is, if they have rates at 2.5%, we would see an increase to 4.5%. This would make access to liquidity more difficult,” said Venegas, who also cites England's current situation as a factor to track for the copper industry.

“In England, the GDP projection goes from -1.2% to -1.9%, unemployment figures from 4.7% to 4.9% and rates from 2.4% to 4.7%, so this recession scenario both in England and in Europe, generate losses for the red metal, since copper is traded on the London Metal Exchange."

In November, the price of copper rose moderately due in large part to expectations of a moderation in inflation in the US and the lifting of China's zero Covid policy, as well as sustained demand from the Asian giant.

Other indices that would also impact the drop in the price of copper are provided by the International Copper Study Group (ICSG).