What is happening in the global economy and why is Copper so high?
Most of the times I do not like to speak about the global economy and these unknown parameters, but at the end of this year 2020 I cannot refrain from saying what is happening on COPPER PRICE levels due to COVID and more.
Late in March the first lockdown came globally out of the blue and almost at the same time.
All global economies stopped and consequently all of us decided to stop or slow down with our purchases, either private and company ones like investments or setting up new projects. Consequently, consumption rate decreased, and private and company savings increased. All of this compressed somehow the financial economy for a new escalation which is now happening.
Regardless of this, since May this year the global economies commenced to recover what had been lost from February to April 2020, ending up in September (at least from the financial point of view) where we were back in January 2020 with new Heights???
Covid death rate is now sadly a new economy parameter such as country GDP or US no farm payroll, unemployment rate announcements and so on and so forth. As a matter of fact, the better is this rate doing (obviously by going down) the better the financial economy running; even if this does not mean that the real economy is effectively improving.
I don’t want to prolong it that much but if you are a businessman or businesswoman, I suggest you to keep constant view on the following big C and check what is the impact on your company and industry. I shortlist for you the BIG 4 Cs.
First “C” as COVID: such strong disease is mixing the economy expectations leveraging them to new unknown parameters and relations which create much more volatility, at least at the beginning of the pandemic period. In other terms every economy player like governmental institutions or other actors, is first checking what is happening on Covid before taking some decisions. Economy is compressed and people stay at the “Window”.
Second “C” as CURRENCIES: like USD/CNH where the Chinese Yuan is reaching the highest levels against US dollar since years, having as consequence that for China industry copper became much cheaper to acquire since it is quoted in US dollar. As a consequence, the initially economic copper was bought flamboyant increasing their storage capacity as they know that the economy downturn would have been at least milder as they initially thought. Also, USD/EUR at the time of writing is reaching 1,21 and as the economy is in USD also for Europe, just making sheer projects of buy the raw materials is becoming more economic.
Third “C” as CHINA: this country is playing a big role either on Covid, (as it has been accused to spread the virus globally, but also probably or allegedly among the first to escape from it as today their ranking is 72 https://www.worldometers.info/coronavirus/#countries) and also on its massive capacity to acquire copper ores and cathodes as they are the biggest consumers.
Fourth “C” as COPPER, as far as our industry is concerned, copper responded both ways, the first one as sheer commodity, so where and when inflation rate is foreseen to increase, the economy prices are expected to rise and as a consequence commodities are increasing their numbers. So did the “RED GOLD” that since March 2020 increased almost 70%. The second way is simple, as it is just the reason of additional speculation for financial institutions and speculators. To validate this “theory” and just for your info normally speaking toward the end of the year copper prices are expected to reduce due to lower seasonality, however and on the contrary this year the vast majority of commodities such as Soybeans, Wheat etc. and also non-ferrous metals (Palladium, Zinc, Aluminum) increased their levels and peaked new heights as speculators gain more and can drive up the prices to the highest level of uncertainty and expectations.