Copper Defies Downdraft in Metals, China Growth
Copper prices have charted their own course over the past two years, decoupling from base metals such as steel, battery metals lithium and cobalt, and ferrous metal aluminium.
While copper prices have risen by about 2% from the end of Q1 2022, steel prices are 26% lower over that period, aluminum prices are down 29% and the prices for cobalt and lithium used in EV batteries have tumbled by 64% and 77%, respectively (Figure 1).
Figure 1: Copper has outperformed base, battery and ferrous metals
Not only has copper defied the general downdraft in the prices of other industrial and energy transition-related metals, it has also bucked the downtrend in crude oil, with which copper has typically demonstrated a significant degree of co-movement over the past few decades. Since 2022, oil prices first fell and then traded in a range. By contrast, copper prices rose significantly in late 2022, then dipped for a while, and are now on their way back towards record highs (Figure 2).
Figure 2: The energy intensity of copper mining may explain its correlation with
Copper has also diverged from China’s economy. Historically, copper prices followed Chinese growth with a lag of anywhere from a few months to one year. China’s pace of growth peaked in 2021 and has been slowing since. Yet, copper has risen anyway (Figure 3).
Figure 3: Copper has also decoupled from China’s overall rate of growth
The only market that copper has maintained its price relationship with is U.S. equities (Figure 4). Copper has a longstanding positive correlation of variable strength with U.S. stocks that dates back decades (Figure 5).
Figure 4: Copper has kept pace with U.S. equities so far this decade
Figure 5: Copper has had positive 1Y rolling correlations with the S&P since 1999
