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Trump or China: What’s Supporting Copper Prices?

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Copper prices

Copper prices rose after Donald Trump was elected as the next US president. However, we saw copper prices strengthening even before the US presidential elections. Expectations of better-than-expected demand from China are also supporting copper prices along with Trump’s proposed infrastructure investments. In this part, we’ll look at the recent indicators of Chinese copper demand to get a sense of the county’s copper demand.

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China’s copper demand indicators

  • The total floor area (in square meters) under construction by Chinese real estate development enterprises rose 3.3% YoY (year-over-year) in the first ten months of 2016. The growth rate rose by 0.1 percentage points—compared to the first nine months of the year.
  • China’s new construction starts rose 8.1% YoY in the first ten months of 2016. The growth rate rose by 1.3 percentage points—compared to the first nine months of the year.
  • Overall, China’s real estate investment data were better-than-expected in October. We also saw a modest recovery in China’s real estate climate index that month, as you can see in the above graph.
  • We saw an improvement in China’s fixed-asset investments last month. China’s investments in fixed assets rose 8.3% YoY in the first ten months of 2016. The growth rate rose by 0.1 percentage points—compared to the first nine months of the year.
  • China’s passenger car sales rose 20% YoY (year-over-year) in October. It’s the sixth consecutive month that car sales grew by double digits in China.

Better-than-expected Chinese demand is supporting copper prices. Miners (XME) like Freeport-McMoRan (FCX), Southern Copper (SCCO), and Turquoise Hill Resources (TRQ) (RIO) followed copper and moved to higher price levels.

In the next part, we’ll see how the copper supply is shaping up this year.

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