Industry News

Copper prices hit high level. Here’s some reasons.


Copper prices kept momentous run going , now climbed to their highest level since September 2011, approaching RMB70,000/t.  On 22th Feb, copper price was $4.1155 per pound. ($9,073.13 per tonne) 

Here are some possible reasons:

(1.)Investors in the commodity anticipate rising demand for infrastructure and construction projects in the post-pandemic economy.  

Investors are also piling into copper on a bet that demand will surge in the coming years, as governments worldwide unleash unprecedented stimulus programs targeting renewable energy and electric vehicles, which will require huge volumes of the metal.

Of all the metals used in the generation, transmission, storage, and consumption, copper remains the common denominator, electricity generation, transmission infrastructure, energy storage, and consumption all require copper. The base metal is used in many construction materials, including electrical wires. The uptick is being driven by short and long term optimism for the commodity due to both strong expected demand and supply constraints.

With the full reopening of the US economy on the horizon and plan to invest heavily in infrastructure, as well as China's ongoing economic recovery, there is reason to believe copper demand will remain high.

China is an important puzzle piece for copper prices because it's such a big consumer of the metal. Demand is so high that inventories there are at their lowest level in nearly 10 years, according to commodity analysts at BCA Research.

(2.)Rapidly tightening physical markets. 

The coronavirus pandemic's impact on the global supply chain and logistics have resulted in year-on-year supply of the metal to tighten. In terms of copper supply, two aspects that are also hindering supply are the lower grade and deeper deposits as well as market appetite and availability of projects. 

In some areas of the physical copper market, supply conditions are at the tightest in years and may come under even more pressure as smelters in top consumer China face shrinking profit margins for processing raw ore into refined metal.Copper treatment charges, an indicator of refining margins, are at $45.50 a tonne, the lowest since 2012.

Chile and Peru are the main suppliers of the semi-processed material of Chinese copper smelters. The tight supply maybe on account of port congestion and logistics difficulties, and even the waves in Chile.

(3.)The expectation that a years-long era of low inflation in key economies may be ending. 

The BofA analysts think prices can rise above $4.54 “at some stage.”

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