(Kitco News) – A perfect storm is driving copper prices to their highest level in a decade, and analysts said it’s only a matter of time before the industrial metal surpasses its all-time highs from February 2011.
According to analysts, copper is benefiting from renewed demand as the U.S. economic recovery picks up steam at a time when the metal is expected to experience a significant supply crunch as mine production is not likely to keep with the growing global appetite.
The latest supply disruption threat in the copper market came Monday after Chilean port workers called for a strike action in response to President Sebastian Piner’s move to block a bill that would have allowed workers to make a third round of early withdrawals from their pension funds.
Chile is responsible for a quarter of the world’s copper mine production.
“Metals supply risk is receiving a jolt as Chilean port workers threatening to disrupt copper shipments for the world’s largest producer nation. At the same time, reflation signals continue to fire on all cylinders, providing a powerful combination for sharply higher prices,” said analysts at TD Securities in a report Monday.
In a separate report Monday, the Canadian bank also said that they were stopped out of their short copper trade. The bank noted that potential disruptions will continue to support higher prices.
“While tracking global freight rates and loading times suggests bottlenecks could already be easing, with these gauges well below February highs, a potential Chilean port strike is a substantial risk given already-tight concentrate markets. In this context, even a modest disruption could have an outsized impact on prices,” said Bart Melek, head of commodity strategy at TDS.
The significant supply/demand imbalance has pushed prices to their highest level since July 2011. June high-grade copper futures last traded at $4.44 per pound, up 2.4% on the day. Copper’s all-time high comes in at $4.6255 a pound.
For the year, copper futures are up nearly 26%.
Natalie Scott-Gray, senior metals analyst at StoneX, said, in a note to clients Monday, that copper prices have room to move higher.
“Copper long-term bull run remains intact, with near-term upwards momentum continuing to gain strength, despite prices moving into overbought territory,” she said.
Daniel Briesemann, commodity analyst at Commerzbank, said that not only is strong economic growth helping to drive copper demand, but the U.S.’s new commitment to decarbonize its economy will be a significant supporting factor.
“In our opinion, the copper market is likely to remain undersupplied this year,” said Brieseman.
Mike McGlone, senior commodity strategist at Bloomberg Intelligence, said in a report Monday that the future looks bright for the copper market as the world moves to reduce its carbon footprint.
“Existing trends in decarbonization and electrification are gaining traction from the new U.S. presidential administration, with negative implications for fossil-fuel prices and positives for metals. We see no going back this time as innovation accelerates and envision a future of the world following the U.S. toward net-energy surplus,” he said.
According to a survey from Bloomberg published last week, investors expect that copper will be the best performing metal in 2021. According to the report, 40% of investors surveyed were bullish on copper, followed by silver.
“Copper-market sentiment and prices may benefit from global economic stimulus following the Covid-19 pandemic in 2020, especially with the positive news on vaccine development,” the report said.
Original Article: https://www.kitco.com/news/2021-04-26/Copper-prices-at-decade-highs-headed-for-all-time-highs-analysts.html
