By Pratima Desai
LONDON (Reuters) – The bullish momentum that has driven prices to a psychological edge of $10,000 per metric ton is expected to continue with the emergence of shortages in the coming months.
Copper prices have been boosted recently by expectations of tight supply and optimism about demand prospects for energy transition applications such as electric vehicles and new technologies such as artificial intelligence and automation.
A rebound in manufacturing activity, particularly in top consumer China, where surveys of purchasing managers have begun to show expansion, has also contributed to enthusiasm for copper, which this week hit a two-year high of $9,988. per ton, with a gain of 25% since then. beginning of October.
Prices accelerated last year after the prospect of shortages of copper concentrate, a raw material for the metal, increased due to the closure of Canadian miner First Quantum's (NASDAQ:) Cobre mine in Panama.
“The overall reality is that we have lost a million tonnes of supply due to mine disruptions and the industrial cycle has taken a turn,” said Piotr Ortonowski, an analyst at Benchmark Mineral Intelligence.
“The long-term energy transition demand story against a backdrop of underinvestment in new mine supply remains intact.”
Copper's gains have been driven in part by the unwinding of short positions (bets on lower prices) taken when the outlook for Chinese demand looked decidedly bleak due to the contraction in manufacturing activity.
“Prices have risen very quickly in recent weeks, we should expect a correction,” said one copper trader.
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Copper prices on the London Metal Exchange (LME) are now around $9,644 per ton.
Interest rate cuts in the United States, Europe and elsewhere also offer potential for growth and demand.
Copper industry sources say supply shortages will soon be reflected in stock draws at warehouses approved by the LME and those monitored by the Shanghai Futures Exchange.
Jay Tatum, portfolio manager at Valent Asset Management, said the copper shortage would be the true test of whether copper prices can sustain themselves “and rise.”
“Copper is moving from an investment story that made a lot of promises to one where some of those promises are starting to be fulfilled: rising copper intensity across the economy, supply-side challenges, shortages of concentrates and replenishment effect after a long manufacturing process slow down.”
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