The pound experienced a sharp decline of more than 4% on the London Metal Exchange.
Copper’s bullish rally, the same that yesterday left it at its second highest level in history, had a hard stumble on the London Metal Exchange. The pound closed trading on the spot market with a drop of 4.61%, its biggest daily fall since March 4 (-5.17%).
With this result, however, the average price of the pound in the year rose to an unprecedented US$ 4.183, a figure that far exceeds the US$ 2.80 of the whole of 2020.
Moreover, the price accumulated a gain of 31.25% this year.
In recent weeks, the rise in the value of the pound has gone hand in hand with the energy crisis and also with the sharp drop in inventories
“Material shortages are the main driver reflected in very low inventory levels. The spread to November soared to over US$1,000 on Monday and is now at around US$685″, Juan Carlos Guajardo, executive director of Plusmining.
“While it is true that logistical problems explain part of the shortage of material, it should also be considered that a single entity is estimated to control between 50% and 80% of LME copper warrants, making attempts at squeezing the market more likely to succeed,” added the expert.
Goldman Sachs said that global copper stocks could reach record lows by year-end and, in the absence of market adjustments driven by higher prices, “completely depleted by the second quarter of 2022″.
Will the price go down or up?
Luke Nickels, commodity economist at Capital Economics, estimates that this copper shortage may ease in the near term, as mines can ramp up production and power shortage issues could ease refined production somewhat.
However, his analysis cools the outlook for the price next year somewhat due to the economic outlook for China, which is the largest consumer of the raw material on the planet and Chile’s main trading partner.
“In contrast, the slowdown in economic activity in China is likely to continue in 2022, particularly within the construction sector, which is a key end-user of copper. As a result, we expect copper prices to fall in 2022, driven by slowing demand growth in China,” he said.
Even so, Goldman Sachs has a positive outlook for the price, pointing to an average value of US$4.33, up from the current US$4.18 and the US$4.22 contemplated in the last update of the Dipres finance report. This value would rise to US$ 5.39 in 2022, US$ 5.44 in 2023 and even US$ 6.35 in 2024.