Copper scales record high on industry and speculative buying

LONDON: Copper burst higher on Friday to a record peak, fuelled by speculators and industrial buyers on the back of rosy economic data as Western economies recover from the pandemic.

Prices have soared by 135% since the lows of last March when the emerging COVID-19 pandemic began to hit demand.

Copper prices have also been propelled by forecasts of surging demand spurred by a green revolution of electric vehicles and renewable energy that will require more of a metal that is a strong conductor of electricity.

Benchmark copper on the London Metal Exchange (LME) broke above the previous record high of $10,190 set in 2011 and had gained 2.9% to $10,385 by 1400 GMT.

"We're in uncharted territory right now and the market is a bit frothy. The industrial players are in panic mode since there's not much supply," said Gianclaudio Torlizzi, partner at Milan consultancy T-Commodity.

Some Chinese buyers of physical copper, such as the State Grid may now have to bite the bullet and buy after holding off from purchases in the hope there would be a pullback in prices, analysts said.

Copper prices may have to hold at high levels to draw out scrap supply to balance the market, Citi analyst Max Layton said.

The most-traded June copper contract on the Shanghai Futures Exchange climbed as much as 2.7% to 74,950 yuan ($11,603) a tonne, its highest since May 2006 and only 1.6% below its record peak of 76,160 yuan.

China, the world's biggest consumer of industrial metals, unleashed stimulus and infrastructure spending last year to promote economic recovery from the pandemic, leading to a record-breaking 38% surge in copper imports.

Moves by China, however, to withdraw stimulus and dampen debt levels, could cool the copper market in coming months, T-Commodity's Torlizzi added.

"Once stock levels in industrial warehouses start to stabilise, together with the credit slowdown in China, that should pave the way for some consolidation lower," he said.

Other metals also hit fresh peaks: Aluminium touched a three-year high, zinc broke through the $3,000 mark for the first time since June 2018, and lead rose to the strongest since October 2019.

LME aluminium gained 2.1% to $2,541 a tonne, while zinc advanced 2.1% to $3,006, nickel rose 0.2% to $17,975, lead firmed 0.7% to $2,232.50, but tin dropped 1.2% to $29,760.