A slump in Chinese demand has been a large driver of lower prices. Credit: Mara Fribus/Shutterstock.com.

Copper prices rebounded on Monday afternoon 23 October, 2023, after dropping to their lowest level since November 2022.

On Monday morning prices fell by as much as 1.2% to $7,856 a tonne on the London Metal Exchange (LME), the lowest in 11 months.

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However; by 1:38 pm Eastern Standard Time, copper that is set to be delivered by November had risen by 0.8% reaching $7,889 per tonne on the Comex market in New York. LME-tracked stockpiles of copper also jumped to their highest level since October 2022 last week.

An anonymous metals trader told Reuters: “Metals are under pressure for reasons which include China property and demand and what looks to be an escalation of the conflict in the Middle East.”

A slump in Chinese demand has been a large driver of lower prices. In September, demand for the metal fell at a time when it usually picks up. According to the National Bureau of Statistics of China, total profits of industrial enterprises in China from January to July were down 11.7% year-on-year. Copper is a key input in the industrial process, and demand has therefore been limited by the state of Chinese industry. The continuing property crisis in China has also negatively impacted prices.

Nevertheless, Goldman Sachs noted that Chinese demand for copper is experiencing a comeback. According to its analysis, copper demand had risen 8% year-on-year.

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The possibility of the Israel- Hamas war widening into a broader Middle East conflict has also dampened sentiment around metals markets. On Sunday, Washington warned of a significant risk to US interests in the region as Israel’s bombardment of Gaza intensified and skirmishes broke out on the Lebanese border.

Copper markets have also been hindered by the Federal Reserve’s decision to hold the benchmark interest rate at a 22-year high and the possibility of further rate hikes in 2024. Higher rates will lead to an appreciation of the dollar, making raw materials more expensive for buyers in other currencies, therefore limiting demand.