Copper surges past $9 000 with supply threats stacking up

15th March 2024 By: Bloomberg

Copper surges past $9 000 with supply threats stacking up

Copper rallied above $9 000 a ton — its highest level in 11 months — as investors react to the risk that global supply challenges will tilt the market back into deficit.

The metal, seen as a bellwether of the global economy, has surged this week after smelters in China held a crisis meeting on how to cope with a sharp drop in processing fees following unexpected disruptions to supplies of mined ore. Increasingly, investors are also warming to the idea that the worst of a global downturn is past, particularly for metals like copper that are finding growing usage in electric vehicles and renewable energy.

A market deficit is expected this year for both concentrates and the refined metal, with a drop in smelter output “following another year of disappointing mine supply,” Macquarie analysts led by Marcus Garvey said in an emailed note. The bank sees prices peaking at $9 500 a ton in the third quarter.

The unexpected tightening in the global copper market has been driven mainly by last year’s closure of a giant mine in Panama, but there are also growing worries about output in Zambia, which is facing an El Niño-induced power crisis.

Global refined copper output may rise by 2.1% this year, lower than previously expected due to the shortage of concentrates, Macquarie analysts said. However, the cuts by Chinese smelters may be limited, they added.

Funds are also making bullish bets on copper as global mined supply tightens and Chinese demand slowly recovers, said Zhan Dapeng, an analyst at Everbright Futures Co.

Copper rose as much as 2% to $9 066.50 a ton on the London Metal Exchange and was trading at $9 025.50 a ton at 7:58 a.m. local time. It’s up 5.5% this week.