LONDON: Copper prices clawed to their highest levels in more than two years on Tuesday as speculators, following technical signals, brushed aside reports of weak physical demand in top metals consumer China. Three-month copper on the London Metal Exchange (LME) was up 0.1% at $10,195.50 per metric ton at 1505 GMT after touching $10,260, its highest since April 2022.
LME copper has gained 19% this year and is just over $600 short of its record high of $10,845 hit in 2022. “We have a market that’s on fire. Momentum right now is in the driving seat - we’ve taken out another peak and that’s attracting fresh buying,” said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.
Many investment funds make buying decisions on technical signals that are showing strong upward momentum in prices.
“It’s a bit difficult, however, to square the rally and the softness we’re seeing in physical demand. That indicates that the market needs at least some consolidation until the underlying macro and fundamentals catch up with the market’s bullish belief,” Hansen said. Funds betting on US interest rate cuts, supply disruptions, and stronger demand for metals in the green energy sectors have been funneling money into base metals and broader commodities while using the sector as a hedge against inflation.
The high prices are curbing activity in China’s physical copper market while demand in the second quarter - a traditionally strong consumption period - is lower than expected, said analyst He Tianyu at CRU Group.
The demand weakness comes from the wire rod sector which accounts for 65% of China’s total copper demand as grid companies fear the costs could transfer to higher electricity prices and have knock-on effects on the economy, he said.
The most-traded June copper contract on the Shanghai Futures Exchange (SHFE) closed 2% higher at 82,280 yuan ($11,368.25) a ton. LME aluminium slipped 0.3% to $2,533.50 a ton after data showing inventories in LME warehouses climbed to the highest in more than 2-1/2 years, having more than doubled in less than a week.
LME nickel fell 0.3% to $19,165 a ton and zinc shed 0.4% to $2,986. Lead added 0.2% to $2,255 and tin climbed 1.4% to $33,370.
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