Copper Hits Record Above $11,000 on Bets That Shortage Looms

(Bloomberg) — Copper rose to its highest level ever, extending a months-long rally led by financial investors who rushed to the market in anticipation of worsening supply shortages.

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Futures on the London Metal Exchange jumped more than 4%, taking copper above $11,000 a tonne for the first time, before paring some gains in afternoon trading.

Banks, mining companies and investment funds have been touting copper’s bright long-term prospects for months, and a flood of investments into the market in recent weeks has increased pressure on bearish traders who have embraced a more cautious stance due to weak spot demand. , particularly in China.

Several developments in 2024 have emboldened copper bulls and attracted a rising tide of hot money. Tight copper ore supplies have fueled talk of a cut in smelter production, and investors are betting that growing use in fast-growing sectors including electric vehicles, renewable energy and artificial intelligence , will compensate for the slowdown in traditional sectors such as construction.

Prices began to take off in early April, and last week the rally accelerated when a short squeeze on the New York futures market sparked a global rush to secure the metal.

“It took prices to another level and it’s very difficult to talk about a top in this environment,” Craig Lang, senior analyst at CRU Research Group, said by phone from Singapore. “Commodity markets tend to exceed their limits. »

Read more: Squeeze in New York copper sales rocks metals markets

Investors, traders and mining executives have been warning for years that the world faces a critical shortage of copper amid growing demand in green industries. Jeff Currie, a commodities veteran and director of strategy on the energy pipeline team at Carlyle Group Inc., said last week that copper was the best long trade he had ever seen.

However, many in physical trading have warned that copper prices are ahead of reality. Demand remains relatively tepid, particularly in China, the main buyer, where inventory levels remain high and copper wire and bar suppliers have reduced production. Chinese demand is so weak that smelters have rushed to export copper as prices in New York and London have exceeded prevailing domestic prices.

Read more: China’s copper gauge at zero offers stark warning to metals bulls

But the divide continued to widen as investors flocked to Western exchanges and bearish traders rushed to buy back their short positions.

Copper’s rapid rise to $11,000 has also brought significant volumes of bullish options into the money, in a trend that could fuel the rally as dealers who sold the contracts decide to hedge their exposure by buying futures contracts.

LME copper was up 2.2% at $10,904 a tonne at 3:15 p.m. in London, having hit an all-time high of $11,104.50 a tonne.

Prices have risen by more than a quarter since the start of this year, leading to broad-based gains for major industrial metals. Like copper, gold also hit a record high, with both metals supported by optimism that the US Federal Reserve will begin cutting interest rates this year.

Read more: The copper market grapples with a crucial question

Repurposed metal

A series of setbacks at major copper mines is fueling fears of a long-awaited production shortfall sooner than expected. Smelter processing fees – an indicator of stress in the ore market – plunged below zero in April, raising fears that mills would be forced to cut production to stem losses.

And the tightening of the Comex exchange in New York has pushed prices to an unprecedented premium over the LME. This sparked a copper rush to the United States, meaning less metal available elsewhere.

“The Comex short squeeze is redirecting copper to the United States and reducing supply in other regions,” Gong Ming, an analyst at Jinrui Futures Co., said by telephone. “The Chinese market is expected to see its stocks soon withdraw with an increase in exports. »

–With help from Liezel Hill, Jason Scott and Guillermo Molero.

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Sara Adm

Aimant les mots, Sara Smith a commencé à écrire dès son plus jeune âge. En tant qu'éditeur en chef de son journal scolaire, il met en valeur ses compétences en racontant des récits impactants. Smith a ensuite étudié le journalisme à l'université Columbia, où il est diplômé en tête de sa classe. Après avoir étudié au New York Times, Sara décroche un poste de journaliste de nouvelles. Depuis dix ans, il a couvert des événements majeurs tels que les élections présidentielles et les catastrophes naturelles. Il a été acclamé pour sa capacité à créer des récits captivants qui capturent l'expérience humaine.
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