LONDON: Copper prices sat near record highs on Monday as signs of extremely tight supply in the London Metal Exchange (LME) system offset concerns that slowing growth in top consumer China will curtail demand.
Traders were paying huge premiums for quickly deliverable copper after available stockpiles in warehouses registered with the LME tumbled to their lowest level in decades.
Benchmark LME copper was down 0.1% at $10,270 a tonne in official trading having earlier reached $10,452.50, within spitting distance of May’s all-time peak of $10,747.50.
Prices of the metal used in power and construction leaped 10% last week and are up and more than 30% this year after gaining 26% in 2020.
Copper’s short-term direction will depend on whether high premiums bring more metal into LME warehouses, alleviating the supply squeeze, said independent analyst Robin Bhar.
He said it was not clear if low LME stockpiles pointed to a genuine shortage, or if metal was available in private storage, but copper’s longer-term outlook was positive due to rising demand as the world moves from fossil fuels to copper-intensive electrification.
Energy crisis pushes copper towards best week since 2016
“The fundamentals are bullish,” he said.
LME Stocks: On-warrant copper inventories in LME-registered warehouses rose to 21,050 tonnes from 14,150 tonnes, the lowest in decades, on Friday.
Dominant Holder: Exacerbating the squeeze, one entity controls between 50% and 79% of LME copper warrants, exchange data show.
Spread: The premium for cash copper over the three-month contract leaped as high as $386 a tonne, the highest in 30 years.
ShFE Stocks: Copper inventories in Shanghai Futures Exchange (ShFE) warehouses at 41,668 tonnes are the lowest since 2009.
China Growth: China’s economy grew by 4.9% in the third quarter, its slowest pace in a year, hurt by power shortages, supply chain bottlenecks and troubles in the property market.
Markets: Global equities fell.
Other Metals: LME aluminium was up 0.8% at $3,198 a tonne after touching $3,229, the highest since 2008, and zinc was down 1.1% at $3,752 a tonne having reached $3,944, it’s highest since 2007, on Friday.
Both metals have been boosted by supply cuts.
Nickel was up 0.7% at $20,150 a tonne, lead rose 1.4% to $2,371 and tin climbed 2.7% to reach $38,200.