What do investors think about this? Can the rally really be over so early in the global economic recovery?

Given the likelihood of many more stimulus in the United States over the next several years and the trend to favor green energy and electric vehicles, it is probably too early to tell that prices have peaked. for the cycle. But the next few months could be tough: Investors inclined to buy the downside might be wise to sit idly by for now.

The bullish argument for copper is clear: Mining investments in 2020 were relatively lukewarm, while demand for green power and copper-intensive electric vehicles looks sure to grow rapidly over the next few years, not just in the future. United States, but in China and Europe. Easy money and a weak dollar also tend to fuel copper prices.

The problem is that the picture of cyclical demand in China, by far the world’s largest user of copper, is less rosy. Credit growth, which tends to pull real estate investment and heavy industrial production, has slowed sharply for three months as regulators tighten the screws on over-indebted real estate developers and the 2020 mini-stimulus wears off. Rising housing prices in China are showing signs of slowing down. And copper stocks on the Shanghai Futures Exchange, although down significantly since May, are still above 2019 levels, according to data from Wind. This means that buyers could be relatively small when restocking, especially if prices do not fall further from current still high levels.

Add to that the resolve of Chinese regulators to curb commodity prices and any further hikes in copper prices this year should rely on a more accommodating Fed or accelerated growth outside of China. Of the latter two, only the latter seems very likely and may not be enough to offset weaker Chinese demand.

Increased investment in green energy is sure to come, but for now President Biden’s infrastructure ambitions remain stuck in Congress and Chinese demand remains the crucial tipping factor for copper. Barring a much larger-than-expected infrastructure deal or skyrocketing global growth in the second half of 2021, copper bulls should consider landing for now.

Write to Nathaniel Taplin at [email protected]