Copper prices gained their biggest monthly gain in more than four years on Friday, as traders predict a sharp rise in demand for the industrial metal will backfire with the global economy.
“Copper prices have risen as a result of high expected and expected demand, stemming from expectations of a strong post-coronavirus recovery, as well as concerns about a shortage of supply and the U.S. dollar. weakening, ”said Jeff Klearman, portfolio manager at commercial asset publisher GraniteShares, which offers Bloiteberg GraniteShares Broadband Strategy No K-1 ETF COMB,
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Prices based on the most active copper revenue contracts ended more than 15% higher for the month of February, according to Dow Jones Market Data. That was the best monthly performance since November 2016. May copper HGK21,
HG00,
fell 17 cents, or 4%, to settle at $ 4.0925 per pound on Friday. Prices set at $ 4,295 per pound on Wednesday, the highest finish since August 2011.
Chinese demand has skyrocketed, with the country accounting for 55% of world copper consumption, Klearman said. At the same time, however, London Metal Exchange’s inventory levels have fallen to 15-year levels and yields in Peru’s major producer have fallen, “creating a major copper‘ deficit ’this year and probably over the next few years. ”
In a report published on 22 February, the International Copper Research Group said that the world’s reformed copper balance in the first 11 months of last year showed an apparent deficit of about 590,000 metric tons for 2020, with the organization citing “apparently strong Chinese consumption. ”
Darwei Kung, package manager and head of products at DWS Group, said copper supply has been “stable, growing at around 2% to 3% per year,” and DWS Group has seen no news of copper mining companies. announcing that new capital expenditure would increase the expected supply beyond the incremental increase.
Strong industrial activity in China is likely to continue from March last year, but outside the country, conventional industrial activity is still hampered by COVID-19, he said. However, the successful development of vaccines and the “relatively effective delivery of vaccines to date have given investors hope.”
With President Joe Biden’s stated policy to promote alternative fuels and renewable energy, many investors have put a price on a higher-than-expected demand for copper, Kung said. Copper is used in renewable energy systems. At the same time, infrastructure investments from the US and other countries will have an impact on the price of the metal, but “a disappointment in infrastructure consumption will result in a downside risk. ”
For now, copper has withdrawn from recent highs, due to “concerns about rising interest rates, but other conditions are still in place” to continue to support your prices, ”Klearman said.