Copper prices on the London Metal Exchange (LME) bounced back on Wednesday, rising 1.2% to $9,786 per metric ton, despite concerns about weakening demand prospects in top consumer China.
The price rebound was driven by a focus on the potential for supply shortages and fund buying, which helped offset the market’s concerns. Anglo American’s announcement that copper output at its Los Bronces mine in Chile is expected to fall by nearly a third next year due to maintenance work reminded investors of the possibility of supply constraints in the market.
However, rising copper inventories in LME-approved warehouses, mostly in Asia, and a widening discount, or contango, for cash metal over the three-month contract suggest there are surplus supplies and weak demand, particularly in China.
Analysts caution that the current price bounce may be short-lived, with further price erosion possible going into the seasonally weaker summer period, despite any mining issues. The wide contango and lackluster manufacturing demand in China do not support the narrative of refined supply being “tight,” as some had previously suggested.
The recent sell-off in copper prices, which saw them touch a two-month low of $9,551 on Tuesday, was fueled by fading hopes of a growth recovery in China. Nonetheless, the latest price rebound was driven by fund buying and a focus on potential supply shortages, which added momentum to the market.