Metals Roundup Dec’23: The year copper had its face ripped off

Image: Magda Ehlers

TL; DR

For December, the RBA’s Index of Commodity Prices was instructive on the year that was.

Essentially, copper continued to have its face ripped off by a lethargic and geopolitically re-prioritised China, with price deceleration now in its 11th month.

Iron ore continued its comeback relative to the disastrous first half of the year, whereas coal and LNG’s best days since Russia invaded Ukraine are behind it. There are probably better days to come (due to the unfunded/uncoordinated green transition requiring higher fossil fuel use for longer) but that didn’t happen in December.

Regardless of the pause rally in risk assets, the dollar is still strong and China’s growth rate has lost two thirds since its glory days, and Lithium prices have followed.

Still high rates, USD strength, geopolitics and a very tired dragon continue to repress breakout prices.

In October I wrote:

That probably means lower base metal prices well into 2024. That’s my base case, but as we know scenarios assume all other things remain equal, and that hardly ever happens.

Well, so far, no change although copper futures are looking up, a little.

Here’s the detail 👇👇👇

1. Base Metals

Cyclical factor headwinds remain. Interest rates and USD still high. Conjecture over when rate cuts will start and whether yield curve will follow given quantum of new U.S. debt issuance required in 2024. China demand and unresolved property market leverage/stress sub-optimal. Zero broad-based stimulus.

Most base metals had their faces ripped off in 2023, with still no reversal of price deceleration, now in its 11th month 👇👇👇 but perhaps things will start to look up in 2024.

2 Bulk minerals - inch by inch 📅👷‍♂️🏗👷‍♀️

The slower 1%-2% rates of change between October and December probably confirm September’s 12% acceleration to be an outlier.

There’s more volatility to come here as China’s demand trajectory, centralised buying, and % self-sourcing acceleration cast a long and complicated shadow 👇👇👇

3. Riding the white tulip bulb 😲

The July 6, 2023, price high for LME Lithium Hydroxide CIF was US$46,046.

In the last days of December 2023 LME prices were down 64% to US$16,580.

Metals round up will return in the first week of February. Until then, see you in the market.

Mike

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