Will Copper Prices Rally in Q2 on Favorable Policies and Arrival of Peak Season

Copper prices extended gains in March helped by stimulus measures rolled out by Chinese government. Prices on Shanghai Futures Exchange registered a 1.98% growth and three-month copper on London Metal Exchange climbed 1.7%.

Will copper consumption pick up significantly in the second quarter – a peak demand season? Are copper prices set for further gains in April?

A majority of futures analysts interviewed by SMM are optimistic about copper prices in this month.

“Output of Chinese copper smelters remains limited, and the low SHFE/LME copper price ratio will leave fewer opportunities for copper importation, so we expect no large oversupply pressure in copper market this month,” analyst from Ever bright Futures said, “besides, the favourable macro conditions will help restore market confidence.”

Analyst from Galaxy Futures agreed with the opinion and told SMM that more pro-growth measures from China and a potential delay of the Fed’s interest rate may lend support to copper prices. In addition, operations at world’s large copper mines have frequently been disrupted lately, leading market to expect real copper supply to fall short of forecast.

“That plus the improving consumption in April, means copper prices will grow further this month, and we expect LME copper to hit $6,600 per tonne and SHFE copper to climb to 46,000 Yuan,” the analyst said.

An analyst from Western Futures added that China’s accelerating investment in infrastructure projects will contribute to stronger copper demand as well, in turn boosting copper prices.

Several analysts, however, are more cautious.

An analyst from Baocheng Futures expressed concerns over China’s growth and a slower recovery in copper consumption.

“Demand for finance-driven copper is still weak,” the analyst explained. “Furthermore, although China set high goals for power investment this year, whether the plan will be materialized remains unknown, and this will add to uncertainty over real copper consumption in power sector.”

Another analyst worried that the continuous growth in copper inventories may block the increase in copper prices.