Conflicting factors push and pull copper prices
Copper opened at $3.81 on Monday, January 8. A few factors are shaping copper prices:
- Cobre Panama, a copper mine in Panama, is in the process of closing after mining company First Quantum’s operating contract was ruled unconstitutional. The mine began operating in 2019 and produced around 1.5% of the world’s copper supply.
- As the U.S. dollar strengthened on January 2, copper prices fell on the London Metal Exchange. Because copper is priced in dollars, it becomes more expensive to foreign buyers when the dollar strengthens.
- Reports show conflicting pictures of China’s manufacturing activity. A private-sector survey showed factory activity increasing more quickly in December 2023, while official data reported it slowed in December 2023. Because manufacturing in China is a major consumer of copper, investors are more optimistic about copper when China’s economy is performing well.
Why it matters: There were 15 price increases on copper in 2023, a similar frequency to pre-pandemic price increases. The annual copper average for 2023 was $3.86. In 2022, the annual average was $4.01.
Aluminum prices continue to soften
Aluminum opened at $1.21 on January 8. There were no increases on aluminum prices in 2023. The year-to-date aluminum average for 2023 ended at $1.26. In 2022, the aluminum average was $1.54.
Steel facility maintenance continues
Steel suppliers held prices through the rest of the December 2023 after a price increase on December 2, 2023. Continued furnace maintenance is keeping some supply out of the market. A price increase of 5%–7% was announced for January 8.
Why it matters: With nine steel price increases in 2023, price increases last year were more frequent than before the pandemic.
- Most price increases were driven by supply being taken out of the market for facility maintenance.
- Four of the nine increases happened in the last quarter of the year, which is an anomaly.
What else we’re watching: Japan’s Nippon Steel plans to purchase U.S. Steel for $14.9 billion. Nippon is one of the world’s largest steel makers. Some members of Congress have raised concerns about the deal’s effect on supply chains, national security and U.S. steelworkers.
PVC market declined through 2023
Overall, the PVC market continues to decline as demand softens. In 2023, there were seven price increases on PVC, but three increases in the second half of the year did not stick.
Why it matters: The last three price increases of the year were margin increases — price increases not tied to the price of raw materials, but instead to cover a supplier’s costs. That type of price increase is less likely to stick.
News roundup
The Federal Reserve (Fed) held interest rates steady for the third meeting in a row on December 13, 2023. After the meeting, Fed Chair Jerome Powell said Fed officials are likely done with rate hikes, and indicated officials discussed the possibility of rate cuts in the future.
Some major shipping groups are rerouting container ships to avoid the Red Sea after Yemen-based Houthi militants started attacking ships in November 2023.
- The Iran-backed militant group says the attacks on ships en route to the Suez Canal are in support of Hamas in its war with Israel.
- Rerouted ships must travel around the southern tip of Africa, a longer trip that uses more fuel, which has caused a jump in oil prices and could affect freight rates.