Copper prices surged to their highest levels in 22 months on Thursday, driven by continued fund buying, a weakening dollar, and tightening inventories.
The rally, which has propelled copper prices up by 13% this year, has been accompanied by subdued physical demand for copper in China, the largest consumer of the metal, according to analysts.
On the London Metal Exchange, three-month copper reached $9,694.50 per metric ton, marking a 1.2% increase, with a peak at $9,739, the highest level since June 2022. Meanwhile, the most-traded June copper contract on the Shanghai Futures Exchange closed up 2.8% at 78,780 yuan ($10,882.42) per ton.
Amelia Xiao Fu, head of commodity market strategy at Bank of China International, noted that the market is still assessing the actual impact of sanctions on Russian materials, with near-term inventory cancellations on the LME contributing to tighter stock levels. Available inventories on the LME dropped by 15,200 tons to a one-month low of 90,400 tons after investors initiated inventory removal requests.
While speculative positions indicate potential for further bullish bets, Fu cautioned that a price of $10,000 per ton could trigger profit-taking. Additionally, indications of subdued demand in China and the likelihood of downstream users postponing purchases in response to elevated prices have tempered the market’s exuberance.
The weaker dollar index, which declined for a second consecutive day following a rare warning by the finance chiefs of major nations, has also bolstered the market. A softer dollar makes greenback-priced metals more affordable for buyers using other currencies.
In addition to copper, the rally across base metals has been amplified by short-covering. LME tin climbed to $33,945, its highest level since June 2022, before settling at $33,470, reflecting a 2.1% increase. The LME cash tin contract traded at a $350-a-ton premium to the three-month contract, the largest premium since July 2023, as inventories in LME-approved warehouses have declined by 45% so far this year.