Sun, June 16, 2024

Copper Hits Record High of $11,000 per Ton

The copper price hasn't been so low for the last four years

Quick Look:

  • Copper prices hit a record $11,000 per ton in 2024 due to supply concerns and speculative bets.
  • Copper prices increased by 25% in early 2024, driven by speculative investments and supply shortage forecasts.
  • Tightening supply and increased demand from green industries and AI spurred price hikes.

In 2024, the copper market experienced an unprecedented surge, with prices hitting a record $11,000 per ton. According to data from the London Metal Exchange, this dramatic rise was driven by speculative bets on an anticipated shortage of copper, a vital industrial metal.

The rally began in early 2024 and saw prices increase by 25%. Several factors supported this surge, including speculative investments and forecasts predicting supply shortages. Moreover, BHP Group Ltd.’s interest in acquiring copper mines from Anglo American Plc. affected the surge. This potential deal signalled significant confidence in the future of copper demand, further fueling market enthusiasm.

Supply Tightening and Short Squeeze Drive Market Imbalance

Among the critical developments was a tightening supply of copper ore, raising concerns about potential output cuts by smelters. A short squeeze on the New York futures market also triggered a global rush to secure copper, exacerbating the supply-demand imbalance. This situation was compounded by increased investments in green industries, such as electric vehicles and renewable energy, which rely heavily on copper.

A renowned commodities analyst, Jeff Currie, described copper as “the best long trade he has ever seen,” predicting that prices could eventually soar to $15,000 per ton. He emphasised that bringing new copper mines online can take 12 to 26 years, highlighting the long-term nature of the supply constraints. Currie likened copper’s emerging indispensability to oil’s rise in earlier decades, marking it the next critical industrial commodity.

Current Prices Near Record: Copper at $10,992.50 per Ton

Current price details reflect the market’s bullish stance. On the London Metal Exchange, copper was trading at $10,992.50 per ton, a 3% increase. Three-month futures climbed 0.8% to $10,848.50 per ton, and one-month futures rose 0.9% to $5.1370 per pound. These figures approach the record high of $11,000 per ton, underscoring the market’s upward momentum.

While copper has seen significant gains, other industrial metals like gold have also rallied. This rise in gold prices is attributed to optimism over the US Federal Reserve potentially cutting interest rates, adding a layer of complexity to the broader commodities market.

Chinese Demand and High Inventory Levels May Temper Prices

Despite the bullish trends, some market observers warn that copper prices may be ahead of reality. Demand in China remains relatively tepid with high inventory levels, which could temper future price increases. The market also faces setbacks, including production shortfall fears due to issues at major mines and smelter treatment fees plunging below zero in April.

The short squeeze on the Comex exchange has driven an unprecedented premium over LME prices, causing a rush to reroute metal supplies to the US. This scramble is intensified by increased demand from sectors such as artificial intelligence, data centres, green energy, and new weapon development, all of which require substantial copper inputs.

BHP’s $40 Billion Bid for Anglo American Rejected

One of the most notable corporate developments was the proposed $40 billion takeover of Anglo American by BHP Group, aiming to create the world’s top copper producer. However, Anglo American rejected the offer, opting to restructure and sell its diamond business, De Beers.

Looking ahead, the high prices could lead to “demand destruction,” where buyers may halt purchases due to prohibitive costs. Expectations that reduced mining output will fail to meet demand fuelled long positions in the market. In China, stimulus measures have bolstered bullish bets on copper. This included loosened property market restrictions and a substantial bond issuance of 1 trillion yuan ($138 billion).

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