“供不应求”逻辑持续发酵 LME铜价狂飙至2022年6月以来最高点

The “short supply” logic continues to ferment, LME copper prices soar to the highest point since June 2022

Zhitong Finance ·  Apr 12 05:48

Source: Zhitong Finance

LME copper futures prices continued to rise and hit their highest level in 22 months.

Friday's copper price benchmark - LME copper futures prices continued to rise and hit the highest level in 22 months. The main logic is that investors continue to bet that copper supply, which has shrunk in recent years, will be difficult to keep up with the recovery in global copper demand driven by the AI boom. After the global copper supply was impacted at the end of last year, copper prices rose strongly as global manufacturing demand showed signs of recovery. The reduction in copper supply combined with stronger than expected demand.

According to the latest data, copper futures prices on the London Metal Exchange (LME) have risen by more than 12% so far this year, and are currently at their highest level since June 2022. Copper prices rose 2.5% to $9,578 per tonne during Friday's trading session.

Investors have been watching for signs of recovery in China's industrial sector, signs of recovery in the US manufacturing industry, and expectations of falling global interest rates. At the same time, production disruptions in large mines are putting pressure on the profit margins of Chinese smelters, greatly increasing the possibility that they will reduce the production of refined copper metals. China's smelters account for more than half of the world's supply of refined copper.

At the end of last year, Panama ordered the closure of a giant mine of First Quantum Minerals Ltd., which meant a reduction of about 400,000 tons from the world's annual copper supply, which first heightened concerns about copper ore and refined copper production. After Anglo American plc (Anglo American plc) announced production cuts of about 200,000 tons, the supply prospects for copper were further tightened.

The global manufacturing industry is recovering. Combined with the AI boom, copper demand continues to grow

Due to the long-term trend of weak consumption, the commodity market initially ignored the scale of these production cuts. However, with manufacturing — the main driver of copper demand, showing signs of recovery around the world, and driven by a fervent wave of AI in global corporate layout — this situation has changed markedly.

Earlier this week, the base metals price index hit a one-year high, rising along with other commodities such as crude oil. As far as base metals are concerned, the industry is recovering at a time when the US economy and the US manufacturing industry are showing signs of continued rebound, while China's macroeconomic data shows signs of stabilization.

Copper is a metal widely used in manufacturing fields such as electricity, electronics, energy, machinery and metallurgy, transportation, and light industry. Since copper accounts for the majority of global consumption of non-ferrous metal materials, copper demand is regarded as an economic barometer, and copper metal is also dubbed “Dr. Copper” by the market.

According to the latest statistics, the US ISM manufacturing PMI for March was 50.3, far exceeding economists' general expectations of 48.4 and the previous value of 47.8. This data marks the first time that the US manufacturing industry has surpassed the critical boom and bust point of 50 after experiencing a 16-month contraction, which means that the US manufacturing industry is expanding. China's manufacturing PMI rebounded 1.7 percentage points to 50.8 in March from February, returning above the 50 boom and dry line for the first time since September 2023.

To be sure, market concerns about the global real estate industry and the needs of some key manufacturing industries remain. However, more and more traders believe that the recovery in the Chinese and US manufacturing industry, as well as large-scale infrastructure spending in emerging markets such as India and the global artificial intelligence boom, will open up a significant new area of copper demand growth.

Wall Street firm Morgan Stanley said in its latest report that with the rapid development of AI technology, copper demand will increase significantly, and AI data centers will become a new growth point for copper demand. Morgan Stanley expects that by the fourth quarter of 2024, the price of copper may rise to 10,500 US dollars/ton. Currently, the price of LME copper is around 9,570 US dollars per ton.

Morgan Stanley predicts that AI data centers will become a new growth point for copper demand. Global AI data center electricity demand is expected to grow at a compound annual growth rate of 18% from 2024 to 2027. The copper demand for AI data centers may increase from 200,000 tons to 500,000 tons per year in 2023 to 500,000 tons to 1.2 million tons in 2027, with a compound annual growth rate of 26%.

In AI data centers, copper metal is mainly used for power distribution equipment and grounding and interconnection. Specifically, copper is mainly used in power transmission (such as cables, connectors, busbars), as well as heat exchangers and sinks, grounding and interconnection, and piping and HVAC systems.

Another Wall Street bank, Goldman Sachs analysts pointed out in a research report that copper will have a supply gap of 250,000 tons in the second quarter, a supply gap of 450,000 tons in the second half of 2024, and copper will rise to 10,000 US dollars per ton by the end of the year. Goldman Sachs analysis points out that, on the one hand, China's demand is recovering strongly. Copper demand is expected to increase 12% year on year in the first quarter, driving a sharp improvement in copper demand. On the other hand, copper supplies continue to be disrupted.

Commodity trading giant Toke Group also pointed out on Monday that demand for copper associated with artificial intelligence and data centers could increase by as much as 1 million tons by 2030 and exacerbate supply shortages by the end of this decade.

Furthermore, the wave of rising copper prices can be described as occurring at the same time as the overall commodity bull market. The current trading price of gold has repeatedly reached record highs, while silver has reached the highest level since February 2021, and the trading price of zinc metal has reached the highest level in a year.

Disclaimer: This content is for informational and educational purposes only and does not constitute a recommendation or endorsement of any specific investment or investment strategy. Read more
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