Copper prices are surging, and for once it’s not because the economy is booming.
The metal — known colloquially as Dr. Copper because its performance is often used to gauge the health of the overall economy — has surged by a staggering 45% since mid-March. That’s despite the International Monetary Fund downgrading its global forecast and a resurgence of Covid-19 infections forcing governments around the world to re-impose business-crippling lockdowns.
Copper’s gain has been driven chiefly by concerns over strains on supply from key producers South America. Thousands of copper workers have fallen ill in Chile, which is by far the world’s largest producer of the metal, accounting for more than a quarter of global supply. Mines have postponed non-essential activities and reduced their labor force in an attempt to keep workers safe without forgoing too much output. Infections are also slowing the mining recovery in Peru, the second-biggest producer.
Meanwhile, demand in China is recovering with factories ramping back up in the second quarter.
“We’re seeing some fairly good demand, we’ve seen some production cuts,” said Bill O’Neill, partner at Logic Advisors in Upper Saddle River, New Jersey. “You’re going to see global demand for copper pickup in the next 6 to 12 months.”