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Copper surges toward $10 000

As bulls bet on global rebound.
Image: Bartek Sadowski/Bloomberg

Copper’s stunning rally toward all-time highs above $10 000 is accelerating, with bulls swarming in to profit as stimulus measures, vaccine rollouts and climate pledges fuel a global recovery from the pandemic.

Copper extended gains to the highest in a decade on Tuesday as global growth underpinned a rally in metals markets ranging from aluminum to iron ore, which by one measure reached a record high. Commodities are advancing toward the highs of the last supercycle, when prices spiked in the early 2000s on a jump in Chinese orders.

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Just as copper demand is set to soar once more, there are mounting concerns that producers will struggle to plug the gap as they battle technical and regulatory pressures. In top producer Chile, a group of port workers began protests against the government’s pandemic relief policies this week, threatening near-term supplies. In the longer term, producers worry that plans to boost mining royalties could stifle investment and make the country less competitive.

“While demand may have done as much as it can for the shorter-term cycle, supply bottlenecks both in raw materials and in freight continue to support,” BMO Capital Markets analysts including Colin Hamilton said in an emailed note. “Meanwhile, positive medium-term global growth dynamics continue to boost financial market interest in commodities as a whole.”

Metals led by copper, a barometer of the global economy, are benefiting as the world’s largest economies announce stimulus programs and climate pledges while rebuilding from the pandemic shock.

Copper rose as much as 2.2% to $9 965 a metric ton on the London Metal Exchange, the highest level since March 2011, before settling at $9 855.50 at 5:51 p.m. local time. Prices hit a record $10,190 in February 2011. Aluminum declined after touching a three-year high. Steel prices are spiking from Asia to North America. The Platts Iron Ore Index, which assesses iron ore delivered to top producer China, rose to a record $193.85 a dry metric ton, according to data from S&P Global Platts.

Despite all the bullishness, near-term copper demand from China may weaken. The top user may ship more of the metal overseas amid weaker-than-expected domestic demand, with the so-called arbitrage window for exports opening up for traders for the first time since September, according to Shanghai Metals Market.

This development “may potentially deter some speculative buying in London in the very short term,” said Wenyu Yao, senior commodities strategist at ING Bank.

Fed Focus

In other markets, gold was steady as traders awaited the outcome of a two-day Federal Reserve policy meeting. The central bank has primed investors for no major changes in its language on inflation and rate expectations.

Spot gold fell 0.2% to $1777.59 an ounce, after gaining 0.2% on Monday. Futures for June delivery on the Comex fell 0.1% to settle at $1 778.80 an ounce. Spot silver rose while platinum edged lower.

Palladium Surge

Palladium pared gains after climbing toward $3,000 an ounce amid bets on surging demand from automakers and supply issues at top miner MMC Norilsk Nickel PJSC. HSBC Holdings Plc said the metal could rise past $3,100 an ounce due to a widening deficit, before dropping to $2 740 by the end of the year.

“High prices will likely encourage the mobilisation of largely unquantifiable above ground stocks,” analyst James Steel wrote in a note, while substitution of cheaper platinum in autocatalysts should start to clip demand.

© 2021 Bloomberg

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