Copper Market Faces Uncertainty Due To Volatility In Supply & Demand In 2022

Looking at the 2022 copper price trends, it can be seen that the copper market has been nearly as volatile as other metals such as nickel and aluminum. Currently, copper prices are attempting to break previous highs but have not yet succeeded.

As copper approaches short-term resistance levels, there is a possibility of a decrease in price. However, it should be noted that the copper market environment is uncertain, and the intraday price movements are hard to predict.

Copper prices in 2022 were quite unstable due to a number of factors including supply shortages in Europe and political unrest in Peru and Chile, which are the two largest copper producing countries in the world.

Additionally, limited production in China, which is the world’s third-largest copper producing country and the world’s largest producer of copper, due to COVID-19 and high inflation rates within the US also contributed to the price fluctuations.

Copper Price: Q1 of 2022

In January 2022, the copper price trend remained relatively stable. Trading volumes on the London Metal Exchange (LME) also remained steady. In February, there was little change in the copper price trend, with prices remaining flat and not showing any significant increase or decrease. According to MetalMiner, this is a relatively rare occurrence.

In March, the copper price trend saw a sudden increase on March 7 before declining again on March 15. This volatility was attributed to a number of macroeconomic factors, including political changes in Chile, such as the election of a new President, and an interest rate increase by the Federal Reserve.

Q2: Copper Volatility Continues

Copper continued within a sideways range in April, but moved more than in Q1. April 1 saw a 3.5% rise in the copper price. Meanwhile, the Fed proved firm in its stance on raising interest rates to cool off inflation. In response, investors began to prepare for aggressive, hawkish action.

Come May, China’s stance on zero-COVID lockdowns became more firm due to more outbreaks, and copper prices reacted accordingly. This ultimately caused Chinese domestic demand for copper to drop, and the possibility of copper taking a bearish reversal appeared more likely. In June, copper prices did indeed slip just in time for another scheduled Fed rate hike.

Copper Price: Q3 of 2022

In July, copper prices fell to their lowest point since November 2022. Meanwhile, China experienced more COVID cases, and it appeared unlikely that zero-COVID measures would ease any time soon. This significantly added to the copper supply strain.

Copper prices saw notable increases in the lead-up to August. There were also several bullish indicators of note, including higher short-term highs.

In September, the copper price index moved up, but only by 1.13%. At the time, this effectively verified the index was in a sideways range. Ultimately, Chile rejected the possibility of passing a new constitution, which would have likely helped support prices amid the current market uncertainty.

Q4 of 2022: Copper Squeeze

At the beginning of Q4, the copper price trend turned downward. In total, the index fell by 5.6% before October 1. Meanwhile, the Fed remained hawkish with interest rate hikes. In September, the central bank implemented another 75 base point rate increase, leading commodity prices to react accordingly.

In November, the copper price index moved out of its sideways trend and began a fairly sharp rally. That same month, the USD finally began to decline in value, helping hold copper prices up.

In December, copper prices remained bullish, rising by 3.87%. The Fed finally slowed the pace of rate hikes. As the year drew to an end, copper prices appeared to have much better support. However, a considerable amount of uncertainty remained regarding 2023 price trends. Peru found itself in an uproar. President Pedro Castillo was removed from office upon trying to dissolve the country’s congress and replace it with an “emergency government.” In the short term, this could end up restricting copper supplies as we enter 2023.