Copper's spectacular rally slows at 9 1/2-year highs

LONDON: Copper touched a new 9-1/2 year high on Tuesday before easing back as investors consider whether strong demand and tight supplies are enough to extend a breathtaking rally.

Benchmark copper on the London Metal Exchange was up 0.2% at $9,112 a tonne at 1140 GMT, having reached $9,305, the highest since August 2011.

Prices have shot up 16% in February, the biggest monthly rise since November 2016, taking gains since the start of 2020 to around 50%.

Many analysts expect demand from the power and construction industries to overwhelm supply, potentially pushing prices into record territory above $10,190 a tonne.

Copper may need to pause in the short term, but the outlook is bullish, said independent analyst Robin Bhar. "I would expect corrections to be pretty short lived," he said.

DEFICIT: The roughly 24 million tonne a year refined copper market is already in deficit and was undersupplied by 589,000 tonnes in the first 11 months of 2020, the International Copper Study Group (ICSG) said.

POSITIONING: Speculators have piled into the market with net longs in LME copper at 54% of open contracts and in Shanghai Futures Exchange (ShFE)copper at 39% of open contracts by the end of last week, brokers Marex Spectron said.

Shanghai Dalu Futures, a brokerage, amassed a $1 billion long position in four days after the Chinese New Year celebrations ended last week, ShFE data shows.

CHINA: Yangshan copper import premiums rose to $75 a tonne, the highest since August, pointing to solid demand in top consumer China.

STOCKS/SPREAD: Inventories in LME-registered warehouses are near their lowest since 2005 and traders are paying premiums for quickly deliverable metal.

MARKETS: Global stock markets fell. The dollar strengthened and oil prices rose.

COPPER/NICKEL SUPPLY: Zambian copper output rose 10.8% last year to 882,061 tonnes and Philippine nickel output increased 3% to 333,962 tonnes, according to government data.

PRICES: LME aluminium was down 0.7% at $2,152 a tonne, zinc was 0.5% lower at $2,885, nickel fell 0.8% to $19,335, lead slipped 0.2% to $2,148 and tin was up 0.5% at $26,740.

All are at or near multi-year highs.