Copper rose above $9 000 a ton for the first time since June, fueled by optimism that China’s reopening will spur demand in the world’s top consumer.
The key industrial metal has bounced back following a 14% decline in 2022, when tough coronavirus restrictions hampered the Chinese economy. The country’s shift away from Covid Zero policies has sparked a rebound, while expectations for less aggressive rate hikes by the Federal Reserve have added support.
The gain is tracking a broader rise in industrial metals, with aluminum, zinc and iron ore all enjoying bright starts to the year. Investors are betting that a slew of property-sector stimulus measures in China will boost the demand outlook.
“You’ve got more of these commodity trade advisor and discretionary fund bids on copper,” said Alastair Munro, an analyst at Marex. “There has been Chinese buying onshore.”
Metals are also receiving support from the weaker dollar, which has slid to near a seven-month low as traders see the Fed turning less hawkish after cooler inflation and employment data. Thursday’s consumer price index will be crucial, with economists forecasting a month-on-month drop in the gauge for the first time since July.
The metals rally comes at a time when stockpiles held by exchanges remain low after a year when production was hit by energy shortages in Europe and China. While that was overshadowed by the dire economic backdrop last year, a revival in demand could substantially tighten the market.
It’s a prospect being flagged by Jeremy Weir, chief executive officer of trading house Trafigura Group, who said metals markets have never been tighter. His voice adds to a chorus of mining executives warning that far greater investment in new mines is needed to meet the demands of the energy transition, which is highly copper-intensive.
Higher metals prices are also driving up the shares of mining companies, with the world’s biggest, BHP Group Ltd., notching a record high on Wednesday.
Copper gained as much as 1.5% to $9,047 a ton on the London Metal Exchange, and was trading at $9,035.50 as of 9:57 a.m. local time. Aluminum rose 1.2% and zinc 0.9%, while tin surged 2.9%. Lead declined 0.5%.