With Russia's military invasion of Ukraine protracted and concerns about economic slowdowns in Europe, the United States and China, the outlook for the world economy is becoming increasingly difficult to predict.
Under these circumstances, "copper" is attracting attention in predicting the future of the economy.
Of course, I'm not that youkai who loves cucumbers.
Copper = Copper.
The price of copper, also known as "doctor copper," is the first to diagnose changes in the world economy.
What can you see from there?
(Reporter, Ministry of Economic Affairs, Kei Nakazawa)
Why is the price of copper predicting the future of the economy?
I'm curious about the economic diagnosis of "Doctor Copper", but before that, let's look at its ability.
In the first place, the reason why we can know the economic fluctuation from the price of copper is that copper is used in a wide range of applications and is involved in various economic activities of companies.
Copper has the characteristics of being easy to conduct electricity and easy to process.
It is used in a wide range of products around us, from electric wires, electronic devices, home appliances to EVs.
Expected sales of these products will increase the speculation that demand for copper will increase, resulting in higher prices.
So where does "Doctor Copper" appear?
The index of the price of copper traded in the world is the three-month futures of copper traded on the LME = London Metal Exchange.
In other words, the price reflects the demand for copper used in future corporate activities and product sales trends.
Copper prices and the world economy
This LME 3-month future has been sensitive to changes in the global economy.
In July 1997, the Asian currency crisis spread in the wake of the plunge in the Thai currency, the baht.
Copper futures prices hit the $ 2,600 level per ton in June last month, but plummeted in July to detect the beginning of the crisis.
It has dropped to the $ 1,600 level in a year.
Copper prices changed two months before the Lehman shock.
It turned down from close to $ 9000 in July 2008 and fell below $ 3,000 in December.
And the new corona shock.
Prices, which were above $ 6,000 at the beginning of 2020, began to fall shortly after the outbreak of the new corona was confirmed in China, falling below $ 5,000 in March.
The fall does not stop at my feet
And now, the world economy may be at a time of change.
LME 3-month futures hit a record high of $ 10,845 in March, but have been on a downward trend since June, and on July 15th, they temporarily reached 7,000 for the first time in 1 year and 8 months. I interrupted the dollar.
In addition to the stagnation of China's economic activity due to the effects of the Zero-Corona policy, there are growing concerns about a global economic slowdown as countries such as Europe and the United States tighten their monetary policy to curb inflation. It seems to be in the background.
There are also movements that support the sign of "Doctor Copper".
The number of used homes sold in June in the United States has been negative for the fifth straight month.
In the United States, the market for pre-owned homes is large, and it is a movement that is worrisome because it is directly linked to sales of furniture and home appliances.
In addition, the top management of semiconductor giant TSMC said this month, "Demand for personal computers and smartphones is declining, and there will be a move to reduce inventories throughout the industry in the first half of next year."
Demand for semiconductors may also be at a turning point.
An official of a major trading company said, "In the global decarbonization trend, the demand for copper, which is indispensable for EVs and renewable energy, is expected to be firm, but the current economic changes suggested by Dr. Copper I'm on the alert. "
What is the economic outlook suggested by "Dr. Copper"?
As monetary tightening continues in Europe and the United States to curb record inflation, there are growing concerns about a slowdown in the economy.
Does the recent movement of "Doctor Copper" suggest a slowdown or recession in the global economy?
I would like to make a firm judgment.
Scheduled to pay attention
Attention is focused on the US FOMC = Federal Open Market Committee meeting, which will be released on the early morning of the 28th of Japan time, and the Fed Chairman Powell's meeting on that day.
With the US consumer price index released this month reaching a record level in June, it is speculated that it may be able to raise interest rates significantly this time as well.
In addition, the financial results of major companies will be announced one after another.
It is also worth noting how companies see the future of the economy.