Metals prices: a genuine breakout or overoptimism?

In a mixed week for commodity prices, copper topped $10,000 per tonne for the first time since April 2022. This is the latest in what has been a rip-roaring start to the year for non-ferrous industrial metals. However, we think the positive sentiment on display is probably overdone, especially as there are signs of softening demand growth in key metals-consuming sectors in China. We think prices will ultimately fall back from their recent breathless rally. 

In the week ahead, besides any further developments in the Middle East, we’ll also be keeping a close eye on China’s PMIs on Tuesday, which we expect to fall back and could take the sting out of the current rally in metals prices. Later in the week, the FOMC meeting on Wednesday and the release of US non-farm payrolls on Friday may fuel the “higher-for-longer” narrative, although recently commodity prices have largely been dancing to their own tune regardless of the Fed.