Global manufacturing is slowly coming back to life, as evidenced by the positive Purchasing Managers' Index (PMI) in January, and industrial metals in particular are poised to benefit. It seems so.
Copper was one of only two metals to end 2023 in the black, and the other. The asset has issued a bullish 'golden cross' signal, with the 50-day moving average well above the 200-day moving average and the price currently looking stable in the $8,400-$8,600 per tonne range.
copper price chart
Some industry leaders expect big gains in the coming months. Robert Friedland, the billionaire founder of Ivanhoe Mine, predicts copper prices could rise to $9,500 a tonne this year.
This bullish view is supported by a combination of lower interest rates and increased demand from China in the second half of this year, and Roberts believes that despite volatility in China's real estate market, China's consumption of the red metal will continue to rise. emphasizes that it is not slowing down. China bought more copper in 2023 than in any year on record, importing 27.54 million tonnes.
“We all know that China's real estate market is depressed, but military demand, national security demand, militarization demand is very high,” Robert told Bloomberg TV last week.
I believe this will more than offset the weak demand for copper from Chinese real estate developers. (And, unsurprisingly, Reuters reports that the country's real estate sector is showing signs of recovery, with new home prices rising at the fastest pace in two and a half years and sales of state-owned land finally turning positive for the first time in 23 months. The injection of about 1 trillion yuan ($140 billion) into the economy will act as a further catalyst, promising an increase in demand for copper.
Copper: preferred transition metal
But copper's allure is more than just a product of market speculation. It is rooted in its key role in driving the green transition. Renewable energy will contribute an unprecedented 11.4 trillion yuan ($1.6 trillion) to China's economy in 2023, more than any other sector, according to a report by the Center for Energy and Cleanup Research (CREA). . The Asian giant invested $890 billion in clean energy technology last year, an amount comparable to the GDP of Switzerland or Turkey.
The mining sector is often at a crossroads in environmental debates, and I believe copper is emerging as a more favorable option than traditional transition technologies such as wind and solar. This is especially noteworthy considering that last year's red metal ended with a modest gain of 1.2% while the S&P Global Clean Energy Index fell over 21%.
Copper total return chart
Moreover, the global economy appears to be on firmer footing than most expected. With inflation trending downward, the Federal Reserve is likely to soften interest rates by mid-year at the latest. This economic environment bodes well for industries that rely on copper, such as automotive and consumer goods manufacturing.
Global manufacturers on a recovery trend
The global manufacturing industry is also showing signs of booming. JP Morgan's Global Manufacturing PMI hit a neutral 50.0 in January, ending a 16-month streak of below 50. This suggests that global manufacturing, an important user of copper, is stabilizing. Click here to read my explanation of the relationship between global manufacturing PMI and short-term commodity demand.
JP Morgan Global Manufacturing PMI
U.S. manufacturers started the year with renewed optimism and increased demand. The S&P Global U.S. Manufacturing PMI rose to 50.7 in January, the highest level since September 2022. This positive change can be attributed to increased production and employment, as well as lower inflation and more accommodative financial conditions.
Meanwhile, the Institute for Supply Management (ISM) Manufacturing PMI showed that U.S. factories are still in contraction mode, but just barely. The manufacturing PMI in January was 49.1, up from 47.1 in December and below the benchmark 50.0 for 15 consecutive months.
More than metal
A combination of economic resilience, surging demand from key sectors, and a revitalized global manufacturing industry will paint a compelling picture for copper in 2024. I am convinced that this metal has a place not only as a material of historical importance, but also as an important element of the world. Drive the next stage of economic and technological progress. In this sense, copper is more than just a commodity. It is the catalyst for a new era of global economic growth.
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The Purchasing Managers' Index (PMI) is an index that indicates the general direction of economic trends in the manufacturing and services sectors. The S&P Global Clean Energy Index is designed to measure the performance of companies in the world's clean energy businesses in both developed and emerging markets, with a target number of 100 constituents.
Stocks held may change daily. Holdings are reported as of the end of the most recent quarter. The following securities mentioned in the article are held by one or more accounts managed by Global Investors in the United States as of (December 31, 2023): Ivanhoe Mines Ltd.
