Copper prices have climbed towards the two-year highs hit last month, as expectations of strong demand growth and hopes for cuts to U.S. interest rates have encouraged investors to pile into the market.
Benchmark copper on the London Metal Exchange (LME) was up 1.3% at $10,134 per metric ton by 1045 GMT on Monday, after touching $10,144.50. Copper hit $10,208 on April 30, its highest level since March 2022.
Investors are anticipating accelerating demand for copper from the electric vehicle, artificial intelligence, and automation sectors in the coming years, which is expected to create significant supply shortages as consumers scramble to secure supplies.
“The demand story is still front and centre; fund money is still coming in,” one copper trader said, adding that optimism over potential U.S. rate cuts was also boosting sentiment. Cuts to U.S. interest rates would weigh on the U.S. currency, making dollar-priced metals cheaper for buyers holding other currencies.
Focus is also on the price differential between copper on the CME and LME, with CME copper trading at a $300 premium, offering traders an opportunity to sell CME and buy LME. However, Marex, a broking and risk management firm, cautioned that this strategy could expose traders to the threat of disruptions to shipments, such as low water levels in the Panama Canal or supply shortages from South America.
Marex referenced the ongoing disputes between the Panamanian government and First Quantum Minerals, a Canadian company operating the Cobre mine in Panama. The president-elect of Panama has ruled out talks about the closure of the mine until the company drops its arbitration proceedings.
The decline in copper stocks in CME warehouses in the United States, by 30% to 21,530 tons since late March, also suggests strong end-user demand for the industrial metal.