Production glitch: A Chilean miner places explosives inside the Kiara copper mine south of Antofagasta. The commodity has risen 8.2% this year, driven largely by concerns about risks to supply. — AFP
LONDON: Copper jumped to the highest since January 2023 as fast-mounting supply risks and fresh signs of a rebound in demand reinforced hopes that the bellwether industrial metal is plotting a course to new record levels.
Prices rose as much as 3.2% in London, getting an initial boost after unexpectedly strong US jobs data showed the ongoing strength of the US economy.
The rally accelerated after a report showing a slowdown in the US services sector reinforced hopes that the Federal Reserve (Fed) will soon pivot to looser monetary policy.
Fed chair Jerome Powell said the central bank will let incoming data guide its decisions, and is unlikely to cut rates until it has stronger confidence that inflation is receding.
Analysts and traders have been turning increasingly bullish on copper in recent weeks, with Goldman Sachs Group Inc predicting prices will reach record highs of US$12,000 by the first quarter of next year, and Citigroup Inc seeing it hit that level by early 2026.
Economic data from China in recent days has helped to boost demand expectations for industrial metals. China’s manufacturing purchasing managers index in March beat expectations, while the US factory gauge logged a surprise expansion.
Copper has risen 8.2% this year, driven largely by concerns about risks to supply. Mine production tightened unexpectedly after last year’s closure of a giant facility in Panama.
Chinese smelters, which produce over half the world’s supply of refined copper, have been moving closer to implementing a joint output cut because the tightening ore supplies have driven processing fees to near zero.
“It’s a case of rising demand and tightening supply effectively coming together,” Michael Widmer, head of metals research at Bank of America, said by phone from London.
“On the demand side alone it would be hard for copper to move substantially higher, but there is a genuine supply crisis out there.”
To be sure, some smelters are still planning major expansions, and rising stockpiles in the Chinese market point to ongoing softness in demand in some key sectors.
In the coming weeks investors will be watching Shanghai exchange inventories closely to gauge both the strength of demand and the extent of any capacity curtailments.
Copper was up 2.8% at US$9,245 a tonne on the London Metal Exchange. — Bloomberg
