Despite the initial rise in the price of copper futures in early May, we are now observing a moderate correction. However, there are several signs pointing to further demand growth and possible supply problems, suggesting that high copper prices will become the long-term norm from my perspective.
The electric vehicle industry is facing major challenges in the current environment due to rising prices of key metals such as copper.
Some crucial raw materials for the industry, such as nickel and lithium, may become more expensive in the future, further affecting the industry's costs.
A number of factors have contributed to the rise in copper prices in recent times. Among them, mining disruptions in Chile, Peru, Panama, and Zambia have caused prices to soar. In addition, political developments could keep these levels high considering that demand will exceed supply in China for the next few years.
To discuss the global copper market, we need to consider two factors: ore production and refined copper production, which is the finished product that is traded on international exchanges.
In recent years, the mining sector has faced several problems. Most copper mining takes place in South America, with Chile and Peru as the main producers, but there are also other nations involved in production. However, episodes of political instability and environmental problems have caused a decline in the supply of minerals on the international market, especially in the countries of Chile and Peru.
In addition, another crisis recently occurred when one of the country's largest copper mines, located in Panama, closed permanently. This had a significant impact on the supply of copper ore internationally.
In contrast, there is the problem of refining. China is the leading country for refining, and with fewer ores available on the market, ore prices are constantly rising, putting a strain on Chinese refiners' profit margins. It is becoming increasingly difficult for them to make profits from refining.
In Chinese companies, there has been much discussion about a possible reduction in refining or an increase in control. There is also evidence to suggest that this cutback has already begun.
In recent times, the ore market has experienced some difficulty because of the Panama mine closure and Chinese discussions about refining. This has led to a degree of uncertainty about whether copper supply is sufficient to meet demand. In addition, the rapid transition of vehicles to electricity is also raising the prospect of increasing demand for this metal.
To understand the potential of the Copper sector, it is important to analyze the leading companies in this field. Usually, a detailed analysis requires the involvement of a financial advisor and can involve high costs, but thanks to INVESTING PRO this has become easier and cheaper. Thanks to our new program based on artificial intelligence, it is possible to obtain accurate evaluations and analysis of companies in the field at a low cost.
Using INVESTING PRO, I conducted an in-depth analysis of a major company in the Copper industry. As can be seen in the figure below, I obtained a key finding: the company has continually exceeded analysts' forecasts, posting higher profits and revenues than expected in its latest quarterly financial statements.
Currently, Copper is in a good position in the market and I expect it to reach the 6 level in the coming months with potential gains of 50 percent.
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