LONDON – Copper on Friday was heading for its biggest weekly gain since 2016 as surging power prices threaten to curb supply at a time when exchange stockpiles are at rock bottom.
A rapid rise in the cost of energy and shortages of power in China have already forced zinc and aluminium smelters to cut output, pushing prices of both metals to their highest in more than a decade.
Benchmark copper on the London Metal Exchange (LME) was up 2.1% at $10 191.50/t at 11:32 GMT, up 9% this week and nearing a record high of $10 747.50 reached in May.
High power costs are also inflationary and this is boosting demand from investors for copper and other physical commodities as a hedge, said Saxo Bank analyst Ole Hansen.
"It looks like we've got clear air ahead of us to that May peak," he said.
ENERGY: The energy crisis in China, the biggest metals producer and consumer, deepened as cold weather swept into much of the country.
IMPACT: High power prices and potential shortages will impact supply more than demand for metals in the coming months, analysts at ANZ said.
COPPER STOCKS: On-warrant copper inventories in LME-registered warehouses have tumbled to 14 150 t, the lowest in at least 20 years, and stocks in the Shanghai Futures Exchange (ShFE) at 41 668 t are the lowest since 2009.
COPPER SPREAD: Low stockpiles have pushed the premium for cash copper over the three month contract to $246/t, the highest since 2005.
SURPLUS: The international zinc and copper study groups said this month they expected both metals to be oversupplied next year, but analysts say the power crisis could change that.
ZINC: LME zinc was up 5.8% at $3 733.50 a tonne after reaching $3 761, it's highest since 2007. It was up a whopping 19% this week after Belgium-based Nyrstar said it would cut production by up to 50% at its three European zinc smelters.
ALUMINIUM: Aluminium was up 2.1% at $3 183/t after touching $3,215, the highest since 2008. It was up more than 7% this week.
OTHER METALS: Nickel was up 2.8% at $19 825/t, lead rose 1.8% to $2 340.50 and tin added 1% to $37 290.