Copper Commentary - 1/13/2023
After a year of tremendously restrictive Covid-policy, China is on the move again ahead of Lunar New Year. Traffic congestion across China’s major cities is rapidly rising along with a geostrategic shift in rhetoric towards foreign nations. What seemed like a new Cold War era around the 20th People’s Party Congress has turned into a change in tone at the G20 Summit in Bali. Xi Jinping didn’t only speak about the establishment of guardrails around the US-China relationship, but also flipped a switch domestically. While CCP leadership continues to prioritize a concept known as “common prosperity”, there’s certainly less emphasis on ideology compared to a few months ago. Given China consumes ~50% of the world’s copper with 20-30% of the economy dependent on real estate, the path of the reopening will be critical for price prospects. After a memorable and consequential year where Beijing reset the country’s social contract, renewable initiatives across the west will grow in importance too. Along with a supply deficit in the middle of this decade, the IEA estimates that clean energy technologies will require 2.1-3.4x as much copper in 2050 relative to 2020. Thus, while China demand will likely drive price action, economic health in the west and renewables demand will be important too. For more commentary on China, check out our Triple Play podcast.