Copper soared to a new record high, continuing a months-long rally fueled by financial investors who have entered the market expecting supply shortages.
Futures on the London Metal Exchange surged up to 4.1 per cent, reaching $11,104.50 per ton and surpassing the previous record set in March 2022. The global copper market is currently experiencing significant turmoil due to a substantial squeeze in the New York market, where prices hit an all-time high last week.
Also read: Gold hits new record high on rising US Fed rate cut expectations, renewed Middle East concerns
The short squeeze caused prices on the Comex exchange to reach an unprecedented premium over the LME, prompting a scramble to redirect metal supplies to the US.
What’s weighing on copper prices?
Copper prices have surged in recent weeks due to increasing optimism about lower interest rates this year and stimulus measures from top importer China. Additionally, expectations of tighter supplies, resulting from production cuts in China and stricter sanctions on Russian metal exports, have driven buying interest in copper.
“The Comex short squeeze is rediverting copper to the US and tightening supplies in other region. The Chinese market is expected to see inventories withdrawal soon with exports rising,” Gong Ming, an analyst with Jinrui Futures Co, was quoted as saying Bloomberg.
The most significant price boost, however, came from a short squeeze on the Comex Exchange last week. Heavy buying of long-term copper contracts pushed prices up and unsettled short positions. U.S. copper futures saw a notable rise due to this squeeze, with traders scrambling to secure copper supplies for delivery on the July contract.
Copper prices have surged by over 25 per cent since the beginning of this year. A sudden restriction in ore supply has heightened concerns that the global market could experience the anticipated shortfall sooner than expected if smelters cut back on refined metal production in response.
However, supply disruptions and a prolonged price surge have empowered copper bulls and attracted financial investors betting on continued gains. At 10:23 a.m. Shanghai time, copper had risen by 3.5% to $11,040 per ton.
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Published: 20 May 2024, 07:45 PM IST
