LONDON: Copper prices jumped to a four-year peak on Thursday as funds bet on strong demand in top consumer China and supply disruptions in top producer Chile leaving the market short of the metal used widely in power and construction.
Benchmark copper on the London Metal Exchange ended up 0.7 percent at $7,289 a tonne from an earlier $7,312.5, its highest since January 2014. It is up more than 30 percent so far this year and on course for its largest annual rise since 2009.
"Funds are on a buying spree, but the timing and strength is surprising," said Quantitative Commodity Research consultant Peter Fertig. "Fundamentals are good. China is a growing economy, it will need more copper. The risk of strikes in Latin America due to labour negotiations is looming."
IMPORTS: China accounts for about half of global copper demand estimated at around 23.5 million tonnes. Its imports rose to 329,168 tonnes in November, up 19 percent from the same period a year ago.
DEMAND: Analysts say China's copper demand growth may be as high as three percent in 2018 from around two percent this year.
DEFICIT: INTL FCStone analyst Edward Meir expects the copper market to see a 130,000 tonne deficit next year after a shortfall of 95,000 tonnes this year.
LABOUR: Analysts at Citi say there are over 30 labour contracts, covering around five million tonnes of mine supply, due to expire next year, most of them in Chile and Peru.
"The largest identifiable potential issue concerns the Escondida contract due June, 2018, given the 2-month strike earlier this year," they said.
"To reflect elevated supply risks over the next 12 months we assume a 6.0 percent disruption allowance for 2018 or 1.26 million tonnes vs 5.2 percent average since the financial crisis or 970,000 tonnes."
DOLLAR: Also helping copper is the lower US currency, down 10 percent since the start of this year against a basket of other major currencies, making dollar-priced commodities cheaper for holders of other currencies.
ALUMINIUM: The price of the metal used in transport and packaging closed up 1.4 percent at $2,283, the highest since March 2012. It is up more than 30 percent so far this year.
Aluminium's gains have been driven by expectations of lower supplies from top producer China, where an environmental crackdown has meant capacity and output cuts in polluting industries such as metal smelting.
ZINC: Three-month zinc gained 0.9 percent to $3,302. So far this year it is up about 28 percent after a 60 percent rise in 2016 due to shortages after capacity shutdowns.
OTHER PRICES: Lead was down 0.6 percent at $2,524, tin added 1.2 percent to $19,925 and nickel climbed two percent to $12,175.
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