As supply shortages are expected to intensify, financial investors are pouring into the copper market, which has helped copper soar to its highest level in history, continuing strong gains for several months.
As supply shortages are expected to intensify, financial investors are pouring into the copper market, which has helped copper soar to its highest level in history, continuing strong gains for several months.
In early trading on Monday, London Metal Exchange (LME) copper surged more than 4%, breaking through $11,000 per ton for the first time. As copper prices continue to rise, the market has seen many optimistic predictions. At the same time,$BHP Group Ltd (BHP.US)$Efforts have been made to acquire the main copper mine of rival Anglo-American Resources Group.
So far in 2024, a number of developments have encouraged market participants who are bullish on copper prices and attracted more and more speculative capital. The tight supply of copper ore has sparked discussions on smelter production cuts, and a brief tightening of the New York futures market this month has sparked a global rush to buy copper.
Craig Lang, chief analyst at research firm CRU Group, said in a telephone interview in Singapore: “This will take prices to another level, and it's hard to say they have peaked in this environment. The commodity market does tend to be overrated.”
Investors, traders, and mining executives have warned for years that the world is facing a serious copper shortage as demand for green industries, from electric vehicles to renewable energy infrastructure, continues to expand. Jeff Currie, a former head of commodity research at Goldman Sachs and chief strategy officer of Carlyle Group's Energy Pathways division, said last week that copper was the best long deal he had ever seen.
Since the beginning of this year, copper prices have increased by more than a quarter, leading the overall rise in major industrial metals. Both gold and copper have risen to record levels, and both metals are supported by optimism that the Federal Reserve will begin cutting interest rates this year.
However, many physical trading participants warned that copper prices are ahead of fundamentals because current demand is still relatively tepid.
Copper supply transfer
A series of setbacks at major mines have fueled fears that the long-awaited production shortage will arrive sooner than expected. Smelter processing fees — an indicator of how tight the ore market is — fell below zero in April.
The shorting of the New York Mercantile Exchange (Comex) also caused the exchange's price to show an unprecedented premium over LME. This has sparked a boom in shifting metal supplies to the US, which means less metal supply elsewhere.
Jin Rui Futures analyst Gong Ming said, “Comex's shorting market is shifting copper to the US and tightening supply in other regions. As exports increase, inventories in the Chinese market are expected to decrease soon.”