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Shifting Tides: Copper Rebounds while Nickel Struggles

Recent movements in the base metals market have become a focal point for investors and analysts alike. Copper prices have experienced a remarkable rebound, while the nickel market grapples with persistent oversupply challenges.

Despite experiencing a period of decline due to concerns surrounding China’s economic slowdown and high interest rates in the U.S., copper has switched back to a positive momentum. Right now, copper prices have risen above $8,500 per ton on the London Metal Exchange (LME).

The rise is due to a significant number of short positions taken by trend-following investors during the downturn. Analysts suggest that if these investors begin to unwind their positions, it could fuel further demand for copper. This could potentially drive prices even higher.

However, on the flip side, nickel prices have been declining due to an oversupply issue. Prices have almost halved since the beginning of 2023. One reason for this trend is that Indonesia, the dominant player in the global nickel market, is producing more nickel than ever before. This oversupply is causing problems for nickel producers. Even large companies like BHP Group Ltd. are feeling the pinch, as evidenced by the significant impairment announced on its Australian nickel assets.

Moreover, looking ahead, some experts anticipate a potential boost in copper prices if interest rates in the U.S. decrease. Goldman Sachs has highlighted the immediate price increase metals, particularly copper, could see from a Federal Reserve-driven 100 basis point decline in U.S. 2-year rates. According to the bank’s analysis, copper could experience a boost of up to 6%. Let’s highlight that due to its extensive use in construction and manufacturing worldwide, copper is often considered as a barometer of global economic health. Thus, if the economy performs well, demand for copper rises, resulting in higher prices.

Ultimately, the base metals market is currently presenting a mixed landscape. While there are opportunities to profit from rising copper prices, caution is advised with nickel.

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