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Copper prices hit eight year highs in Shanghai, four year highs in London

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The Chinese are back in full growth mode, of that there can be no doubt. The latest PMI numbers, both for Chinese manufacturing and non-manufacturing are firmly in positive territory, and the Chinese have for many months been reporting that their country is largely free of the coronavirus.

Chinese growth for years has underpinned the demand for commodities for years now, and continues to do so.

The ongoing positive sentiment about Chinese growth has sent copper prices to eight year highs in Shanghai and four year highs in London, with infomine.com quoting a price of US$3.34 per pound at the time or writing.

China is the world’s biggest consumer of copper.

It’s not just the demand side that’s been helping the copper price, though.

There have also been some constrictions to supply as coronavirus-related issues have caused operations at several significant mines, particularly in South America, to be disrupted. The combination of strong demand from China and cutbacks in supply have put the market on track for a deficit this year.

Global copper inventories are at the lowest since 2014.

“We expect the economic recovery in 2021 to benefit metals demand,” said Ephrem Ravi, an analyst at Citigroup. “Late-cycle metals prices should outperform as improving demand meets with already high utilization and low inventory.”

Vaccine news in the Western world is also affecting sentiment, as traders begin to wonder if European and North American economic recovery is now on the cards too. Elected politicians in the West, looking for good news policies to implement in what has overall been a dark year, have been talking up their environmental plans.

And copper is set to benefit significantly from the continued greening of the global economy, as it is used heavily in the manufacture of electric cars, wind turbines, and solar panelling.

Such an outlook lies behind recent upgrades for the likes of Rio Tinto (LON:RIO), Central Asia Metals (LON:CAML) and Glencore (LON:GLEN) from broker RBC. Other companies likely to benefit include Antofagasta (LON:ANTO), which as already risen by more than 20% over the past 12 months, and smaller explorers and developers like Kincora Copper (CVE:KCC), Castillo Copper (ASX:CCZ)(LON:CCZ), Asiamet Resources (LON:ARS), Los Andes Copper Ltd (CVE:LA), and Solgold (LON:SOLG).

The most-traded January copper contract on the Shanghai Futures Exchange ended up 3.7% at 57,680 yuan per tonne, or US$8,757, according to Reuters.

On the LME, prices rose 2% in early Monday trade to US$7,648 per tonne, up 13.8% on a monthly basis.

 

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