Philippine Markets Newsletter

PH MONDAY MACRO: The Philippines’ third most valuable metal signals positive trends in the near future

January 22, 2024

Copper, often referred to as “Doctor Copper” in the world of global commodities, plays a crucial role as an economic indicator since its price movements closely align with changes in economic activity.

With that, the Philippines’ recent uptick in copper prices after months of downtrend may signal opportunities for investments.

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The Monday Macro Report
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In the expansive area of global commodities, copper has consistently held a distinguished position, often regarded as the metal with a PhD in economics.

Such is its name because of its price movements often serving as an indicator of economic trends and changes in the overall economic landscape.

Yet, copper’s supply remains relatively stable and is not typically overly responsive to changes in price levels. Copper plays an essential role for its significance in home construction through electrical wiring and roofing, as well as in the manufacturing of electric appliances and automobiles.

So when copper prices rise because of higher demand, investors should look out for an upswing in economic activity.

Eventually, demand plateaus at some point and copper prices come down. Although lower prices are beneficial for manufacturing companies, the subsequent reduction in demand for their products can trigger a chain reaction.

Specifically, a drop in demand for manufacturers’ products causes them to cut back on copper orders, leading to reduced orders and subsequently a decline in copper prices. This signals a decrease in demand, causing the price of copper to drop.

This close alignment between copper prices and economic activity underscores its role as a key leading indicator of economic health.

This is evident in the chart showing how copper prices were up 65% in March 2021. That’s before the economic expansion materialized in June 2021, with manufacturing output and construction value growth rate seeing a jump of 453% and 32%, respectively.

Copper prices are correlated with these factors as it is one of the most cost-effective conductors available. Unlike gold, which is a better conductor but obviously more expensive.

Copper’s price exhibited positive momentum in September 2023, up by 6% versus the same month from the previous year. This was the first time it rose in 2023 after months of decline.

Copper output also increased, reaching 133,072 dry metric tons (DMT) compared to 125,852 DMT the previous year, primarily due to elevated mine production from Carmen Copper Corp. (CCC) in Cebu.

However, for the first three quarters of 2023, copper production value was lower at PHP 18.79 billion, equivalent to 9.9% of metallic production value, after nickel and gold.

Even with a 2% growth from 190,767 DMT to 195,533 DMT produced, value was lower because copper prices fell by 5.3% to $3.90 per pound from $4.12 per pound year-on-year.

Nevertheless, we can expect a positive economic trend, especially with ongoing activity in construction and manufacturing still rising by 2% and 18% in November 2023, respectively.

Hence, investors should pay attention to copper price trends as they tend to rise with increased demand, especially for applications like electrical wiring in homes or businesses. This provides a valuable gauge of construction and manufacturing health.

About the Philippine Markets Newsletter
“The Monday Macro Report”

When just about anyone can post just about anything online, it gets increasingly difficult for an individual investor to sift through the plethora of information available.

Investors need a tool that will help them cut through any biased or misleading information and dive straight into reliable and useful data.

Every Monday, we publish an interesting chart on the Philippine economy and stock market. We highlight data that investors would normally look at, but through the lens of Uniform Accounting, a powerful tool that gets investors closer to understanding the economic reality of firms.

Understanding what kind of market we are in, what leading indicators we should be looking at, and what market expectations are, will make investing a less monumental task than finding a needle in a haystack.

Hope you’ve found this week’s macro chart interesting and insightful.

Stay tuned for next week’s Monday Macro report!


Angelica Lim
Research Director
Philippine Markets Newsletter
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