“Docteur Cuivre” has management on the wing, quickly the recession?

As the lengthening days herald the arrival of spring, the drop in industrial raw materials, particularly copper, often heralds a global economic slowdown. Fears of a looming recession are growing as central bankers deliver their very proactive anti-inflation speeches and raise their interest rates. All markets are reacting, including the oil market, whose prices have fallen by almost 10% in a month.

The movement is so clear in the base metals. The London Metal Exchange (LME) index has dropped 30% since the beginning of March. That’s exactly what iron ore has lost in the last four months. Steel prices have fallen by 14% since the beginning of May. Among that sample, copper, which was worth over $10,500 a ton at the end of winter, is falling below $8,000. However, as it is present in all sectors of the economy, the level of demand and prices for the red metal should be indicative of the state of health in the world. By this criterion, “Doctor Cobre” does not herald a bright future.

“China’s zero Covid policy largely explains the drop in prices. This country consumed 10% of the planet’s metals in the early 2000s, today it is between 40% and 50%, analyzes Benjamin Louvet, a commodity specialist at OFI AM. But Beijing voluntarily closed 25% of Chinese economic capacity for a while. Today, activity there is in full recovery, but it is the West’s turn to falter. In the United States, “the only question is: how deep will the recession be? says Raphaël Gallardo, chief economist at Carmignac. A decline in GDP is also a scenario that European banks should study, Andrea Enria, head of banking supervision at the ECB, told the Strasbourg parliament last Thursday.

Essential. However, copper is specific because it is “the only metal essential to all energy transition technologies, from solar panels to wind turbines, through chargers and batteries for electric cars”, continues Benjamin Louvet. That is why Máximo Pacheco, president of the Chilean mining group Codelco, the world’s largest producer of red metal, remains optimistic about the future. “Copper fundamentals are very strong because the future is very electric,” he told Reuters recently.

Cutting professionals and dealers are not mistaken. Whatever the price per ton on the London market, there is hardly a day without copper theft from a construction site, a factory, a photovoltaic park or a telecom operator. Ten days ago, 600 households and administrations were deprived of telephone and internet following the theft of cables in Saint-Sauveur-Villages, in the department of Manche. The dreaded recession should not depress the “Copper Doctor” for long.

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