Will China’s Stimulus Measures Revive Copper Demand?

Overall, the Copper Monthly Metals Index (MMI) fell 4.56% from July to August.

Aside from a short-lived rise at the start of July, copper prices today remain in a downtrend, with prices falling 5.76% from the previous month. Prices did manage to rebound in August, although not enough to signal a trend reversal.

World’s Largest Copper Mine Ends Strike

A strike at the world’s largest copper mine helped buoy current copper prices, putting the downtrend on pause during the first weeks of August. Pay disputes triggered a union strike at BHP’s Escondida mine in Chile, which began on August 13. By August 18, however, the Union agreed to a new three-year deal, which put an end to protests. Escondita accounts for roughly 5% of global copper.

Disruptions have become a fixture within the mining sector in recent years. Beyond Chile, copper mines in Peru, including the world’s second-largest copper mine, Las Bambas, faced repeated blockades as communities pressured mining companies for greater support. Meanwhile, First Quantnum’s Cobre Panama copper mine remains idled following community backlash.

On an individual level, mine disruptions do not have a meaningful impact on copper prices today, as demand at the refined level plays a much larger role. However, as a long-term copper supply deficit looms, such outages have greater potential to spook market participants waiting for supply tightness to materialize.

Copper Prices Today, Chinese Steel Price Correlation Erodes

Had Chinese copper consumption proven itself stronger last quarter, copper prices may have managed to avoid the downside retracement witnessed since late May. Instead, limited consumer demand allowed for a significant rebuild in SHFE inventory levels, which ultimately offset relative tightness in the U.S.

Much of China’s gloom relates to its property sector, a bubble that has been deflating for years. Stimulus measures announced thus far have proven unable to halt declining home prices, a situation worsened by China’s aging population. As a result, key industries like steel have started to buckle amid calls that China already reached peak steel demand.