Supply shortage pushes copper higher

Copper prices advanced to rally towards record highs on Monday as hints of highly tight supply exceeded concern that slowing growth in top consumer China will influence demand.

Traders were paying enormous premiums for quickly deliverable copper following stockpiles in the London Metal Exchange’s (LME) warehouse system tumbled to their weakest level in decades.

Benchmark LME copper CMCU3 was higher 0.2% at $10,303.50 a tonne at 1110 GMT. This came after touching $10,452.50, within the spitting length of May’s all-time peak of $10,747.50.

Prices of the metal utilized in power and construction leapt 10% last week. They are higher and more than 30% this year after growing 26% in 2020.

According to an independent analyst, Robin Bhar copper’s short-term direction will depend on whether high premiums take more metal into LME warehouses, easing the supply squeeze.

He stated it was unclear if low LME stockpiles lead to a genuine deficiency. Moreover, it is also unclear if the metal is ready in private storage. However, copper’s longer-term outlook was positive because of rising demand as the world moves from fossil fuels to copper-intensive electrification.

He added that the fundamentals are bullish.

LME stocks: On-warrant copper inventories in LME-registered warehouses increased to 21,050 tonnes from 14,150 tonnes, the weakest in decades. MCUSTX-TOTAL

Dominant Holder: Increasing the squeeze, one entity authorities between 50% and 79% of LME copper warrants, exchange data display.

Spread: The premium for cash copper over the three-month contract jumped as high as $371 per tonne, the most distinguished in 30 years. MCU0-3

ShFE STOCKS: Copper inventories in Shanghai Futures Exchange (ShFE) warehouses to 41,668 tonnes are the weakest after 2009. CU-STX-SGT

China growth: China’s economy expanded by 4.9% in the third quarter, its most moderate pace in a year, damaged by power shortages, supply chain bottlenecks, and problems in the property market.

Markets: Global equities declined. MKTS/GLOB

Other metals: LME aluminium CMAL3 was higher 0.9% at $3,198.50 per tonne after reaching $3,229, the highest after 2008, and zinc CMZN3 were below 0.8% by $3,765 a tonne having touched $3,944, it’s most distinguished after 2007, on Friday.

Supply cuts have supported both metals.

Nickel CMNI3 was higher 1% at $20,210 per tonne. Lead CMPB3 increased 1.4% to $2,371. Moreover, tin CMSN3 improved 1% to $37,555.