Copper prices retreated in the first half of 2022 after a sharp rise caused by the Russia-Ukraine incident and fell again on concerns about the Federal Reserve raising interest rates and global economic growth.
The Fed’s rate hike process and the decline in global economic growth expectations under high inflation will lead to a macro tightening.
Disturbances on the supply side in the first half of the year mainly occurred in South America. The decline in copper mine production in Peru is mainly related to social conflicts and government tax increases. Peru’s government is expected to deal with the problem in the second half of the year, and resume copper mine operations as soon as possible to obtain tax revenue.
The fall in the manufacturing PMI and high inflation have led to lower demand, and the level of demand has not been greatly affected for the time being. These effects have a certain hysteresis and may ferment in the second half of the year.
To sum up, in the context of macro tightening, supply has recovered slightly, and demand has continued to be weak, the market generally believes that copper prices may continue to face downward risks.