With the continuous increase in expectations for global economic recovery and the demand for industrial raw materials, London copper prices are further moving towards a milestone level after opening on Monday: the $10000 mark!
Market data shows that LME copper prices have continued to rise since the opening of the day, reaching a maximum of $9988, continuing to reach a nearly two-year high, only one step away from the $10000 mark. In recent weeks, industrial metal prices have generally risen as signs of improved manufacturing activity from the United States to China have boosted demand, and stubborn inflation has also attracted new bets that the commodity market will continue to thrive.
Federal Reserve Chairman Powell stated last week that the Fed may need "longer than expected" to ensure inflation is under control.
From the trend of the year, LME copper has accumulated an increase of over 16% so far this year, with most of the gains achieved this month.
Commodity market analyst Jake Lloyd Smith said that the surge in copper prices has accelerated this month and is now on the verge of returning to $10000 per ton. The rise in copper prices seems to be due to the still robust macroeconomic data in the United States and the prospects for improvement in China's manufacturing industry. Furthermore, everyone believes that copper is an important cornerstone of energy transformation. This constitutes a very attractive demand side background.
Lloyd Smith also mentioned some of the supply issues currently facing the copper market, particularly the closure of a major copper mine in Panama, low production from Chilean company Codelco, and the suspension of a project in the Democratic Republic of Congo. He said that from a broader perspective, the industry has been constantly warning that the construction of large mines is becoming increasingly difficult and the costs are also increasing.
Last Friday's news showed that due to the impact of the mining accident in March, Chile's national copper company Codelco stated that its copper production in April is expected to decline, further raising concerns in the market about insufficient copper supply. Chilean Minister of Mines Aurora Williams said, "We have deployed an emergency plan and are expected to resume production in the third quarter of this year."
Last month, due to an accident, Codelco's Radomiro Tomic mine suspended most mining activities, causing its production to drop to the lowest level in 20 years. The union leader of the mine, Ricardo Torrejon, stated that currently only about one-third of the mining transport vehicles at the Radomiro Tomic mine are in operation, and it is expected to gradually resume normal operations by early May.
$10000 "milestone"
It is worth mentioning that, against the backdrop of the continuous significant increase in copper prices in the past few weeks, asset management companies have set a new record for the net long position size of London Copper. The long positions in copper futures contracts on the Chicago Mercantile Exchange (CME) are also at their highest level in January 2018.
At the beginning of this year, although many industry institutions had predicted that copper prices were expected to rise above $10000, it was clear that few had anticipated that copper prices would soon reach this milestone. Currently, many institutions have further raised their expectations for copper prices as a result.
Goldman Sachs strategist Nick Snowdon recently stated that the latest rise in copper prices is just "a small foothold on its climb to Mount Everest", and there will be a "very serious" shortage of refined copper supply. He predicts that the average copper price next year will reach an astonishing $150 million per ton.
Jeremy Weir, CEO of Tok Group, also pointed out that in order to fill the potential supply gap of 8 million tons by 2034, mining companies need copper prices above $10000 per ton, or even up to $12000.
Ole Hansen, head of commodity strategy at Shengbao Bank, stated in a report that multiple mining companies have announced production downgrades due to various factors, including increased input costs, decreased ore grade, and weather related disturbances. He pointed out that the green transformation and the increasing use of artificial intelligence applications are increasing the demand for copper in traditional industries such as construction, and prices are likely to reach a new historical high in the second half of this year.
Of course, after the rapid short-term rise in copper prices, there are also many industry insiders who are more cautious at present. Last week, the annual World Copper Conference and Cesco Copper Week were held in Santiago, Chile for the first time. Last Friday, the Montreal Bank Capital Markets summarized the conference atmosphere as "active but not bullish" in a research report on the industry's grand event.
Participants generally believe that although most market participants are pleased with the rise in copper prices over the past month, the recent rise in copper prices may have slightly exceeded the fundamentals.
"We believe that this (significant rise in copper prices) reflects a large influx of funds into the copper market, and that commodities, as an asset class, many producers hope to learn more about this trend. Some believe that demand will further improve to support current price levels, but if this situation does not occur soon, the recent rise may prove fragile," said Bank of Montreal Capital Markets.