Copper Prices Face Potential Decline Amidst Weak Chinese Demand

Copper prices may fall further from their highs earlier this year if demand from China continues to weaken, warned Duncan Wanblad, CEO of Anglo American. Despite the anticipated increase in copper demand driven by global decarbonization efforts, the metal's price remains heavily influenced by Chinese economic sentiment.

Wanblad highlighted copper's sensitivity to market perceptions about China. "There's a possibility that there could be more pressure in the second half of the year and I think to the extent that there is, it's much more fundamentally going to be led by what's happening in China," he said.

In 2024, copper prices soared, driven by supply concerns due to the shutdown of a major copper mine in Panama and production cuts by leading mining companies. However, these anticipated shortages have not fully materialized, and prices have recently been impacted by China's economic slowdown, the largest global consumer of copper.

Three-month copper futures on the London Metals Exchange have dropped 16 percent from their peak of $11,000 per tonne to just over $9,100 per tonne. Copper stockpiles monitored by the Shanghai Futures Exchange reached a four-year high of 339,964 tonnes in June but decreased to 309,182 tonnes by July 19.

Wanblad remains optimistic about the long-term prospects of copper. "I haven't lost any confidence at all in copper and copper markets. You know, the key drivers of the demand for copper are not going away," he asserted.

Copper, essential for electrical wiring, plays a crucial role in decarbonization. The high costs of greenfield exploration and investor pressure for returns through dividends and share buybacks have deterred large mining companies from developing new mines.

Anglo American, a major player in the copper market, defended itself against a £39 billion takeover bid from BHP earlier this year, underscoring the metal's importance. The company is undergoing a significant restructuring, planning to spin-off or sell its platinum mining business and De Beers, its renowned diamond business, to focus on its South American copper mines and South African iron ore division. Wanblad indicated that London is a potential location for an initial public offering of De Beers.