Key Takeaways
- Copper prices reached their highest level in over a month, gaining 1.7%.
- Chinese market tightness due to declining inventories and strong physical demand is driving the price increase.
- Hopes for a ceasefire in the Iran conflict are supporting industrial metal prices.
Copper prices have surged to their highest level in over a month, reaching $13,851 per metric ton by 0915 GMT on Tuesday. This increase was driven primarily by robust demand in China and declining inventories, according to market analysts.
ING commodities strategist Ewa Manthey highlighted that the Chinese market is experiencing tightness due to falling stocks and rising import premiums. The most traded copper contract on the Shanghai Futures Exchange also saw a 1.6% gain to $15,589.29 per ton, with the premium over SHFE prices reaching its highest since May last year at 435 yuan per ton.
The decline in copper inventories is significant; SHFE-monitored warehouses have seen a 82% reduction since early May, while LME-registered warehouses have experienced a 28% decrease. The London Metal Exchange (LME) cash contract moved to a premium of $8 over three-month prices from a discount of $66 on July 10, indicating a tightening supply situation.
The rally in copper prices is not isolated; other industrial metals also saw gains. LME aluminium increased by 0.7% to $3,161 per ton as global primary output fell and tariffs on imports into the United States were adjusted. Zinc gained 1.4% to $3,569 per ton, lead added 0.5% to $1,889, nickel was up 1.3% at $17,155, and tin climbed 2.2% to $54,050.
Market optimism is further bolstered by hopes for a ceasefire in the Iran conflict, which has pushed down oil prices and buoyed equities. However, the rally will need continued evidence of tightness in the physical market to extend much further, according to Manthey.
The surge in copper prices reflects the interplay between supply and demand dynamics, particularly influenced by China's economic performance and geopolitical developments. Analysts are closely monitoring these factors as they continue to shape the global metals market.
Copper is being pulled higher by a tightening Chinese market. Stocks are falling, import premiums are surging and physical demand has remained stronger than expected despite the seasonal slowdown.
Ewa Manthey, ING commodities strategist
