ASX Copper Stocks Slide On China’s Commodity Price Capping Move

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ASX Copper Stocks Slide On China’s Commodity Price Capping Move

 ASX Copper Stocks Slide On China’s Commodity Price Capping Move
Image source: Gary Whitton, Shutterstock

Summary

  • Copper prices are at record high levels since mid-February due to demand surge and supply deficit.
  • The surging commodity prices in China have squeezed margins for manufacturers, and the country is planning to cap the commodity prices.
  • Australian copper stocks fell as red metal prices slipped on the concerns of commodity price capping by China.

China is the largest consumer of copper, which has recently been enjoying a bull run. Thus, the fate of the red metal is highly dependent on the Asian country. The Chinese industry ministry has recently unveiled plans to take steps to stabilise the prices of raw materials.

So, the question arises whether copper will continue to maintain its growth trajectory. 

Copper On A Bull Run:

Currently, copper is trading near its February peak prices of US$4.3 per pound on the Comex market in New York, the highest since 2011.

The surge in demand, along with better-than-expected economic recovery results from the US and China, are adding lustre to the prices of the red metal. In addition, President Joe Biden's US$2.0 trillion infrastructure plan has acted as a  catalyst, driving the demand and the prices to the next level.

Moreover, supply disruptions experienced by some of the South American mines have created a market deficit, thus boosting copper prices.

Source: © Effe45 | Megapixl.com

Interesting Read: Copper gears for an all-time-highs

With the advancement of globally accepted commodity supercycle, the booming copper prices are also driving traction towards copper stocks, such as ASX-listed BHP Group (ASX: BHP), Rio Tinto (ASX: RIO), OZ Minerals (ASX: OZL), Castillo Copper (ASX: CCZ), Aeris Resources (ASX: AIS) and Sandfire Resources (ASX: SFR).

China’s Plan to Stabilise Rising Commodity Prices:

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A recent jump in the demand for home appliances coupled with the electric vehicle boom has increased the demand for copper, creating a huge gap between demand and supply. China’s customs data show that its imports of iron ore and copper concentrate jumped about 8 per cent y-o-y in Q1.

The skyrocketing copper prices have squeezed the margins of Chinese manufacturers, and the country doesn't want the prices of raw materials to rise further.

Early this week, China's industry ministry made it clear that the country will take measures to stabilise the skyrocketing prices of various commodities. The ministry also vowed to strengthen the supervision of the market.

Must Read: BHP Group (ASX:BHP) churns out robust production numbers, ups copper guidance

Impact of China’s Commodity Capping Policy on ASX Copper Miners:

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After the ministry update, investors witnessed a stellar run by making huge profits and copper prices fell on Thursday.

The country’s extended commitment at the two-day global climate summit, hosted by Joe Biden yesterday, to curb greenhouse emissions, has also weighed down copper prices.

Australian copper miners, including OZ Minerals, shed 3.6% to hit its lowest level since 30 March, while Aeris Resources, Castillo Copper and Sandfire Resources traded down by ~2% on 23 April 2021.

Good Read: How copper bull run is impacting Rio Tinto’s trajectory

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