Copper hits $7,000 on Chinese demand and US stimulus hopes
Copper topped $7,000 a ton for the first time in more than two years, partly driven higher by renewed hope for a US stimulus package.
It has rallied 60pc from its mid-March lows amid rising sentiment, touching $7,034 a ton on Thursday – its highest level since June 2018.
Prices have been buoyed by a swathe of complementary conditions including strong demand from China and optimism over stimulus talks in Washington. Disruption to the supply of copper has also lifted the price.
The ubiquitous metal – which has a wide variety of uses – is sometimes called ‘Dr Copper’ for its ability to indicate the underlying health of the global manufacturing economy. Demand for copper is expected to rise in the coming years due to its potential applications in electric vehicles and renewable energy development.
Ole Hansen, head of commodity strategy at Saxo Bank, said the rise had also been driven by a surge in China’s yuan to its strongest level in two years.
“As the metal rallies, buyers in the world’s largest commodity consuming nation can afford to pay a higher price,” he said, adding that this trend should extend beyond the looming US presidential election as China’s economy continues to recover strongly.
He warned the rally was defying “fundamental headwinds”, including a recovery in exchange-monitored copper inventories, which hit a fifteen-year low earlier in 2020.
Adding to upwards pressure on copper’s price, mining group Lundin suspended its operations at the Candelaria site in Chile on Tuesday night after failing to reach a wage deal with workers, who have launched strikes and protests.
Bjarne Schieldrop, chief commodities analysts at Swedish bank SEB, said global economic weakness outside of China was disguising a potentially major underlying copper rally, anticipating an average price of $7,200 a ton next year..
“Record Chinese copper imports have led to a partial depletion of non-China copper stocks,” he said. “The eventual non-China economic revival thus has the potential to drive copper prices into a real spike.”
