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Markets

Copper prices lifted by inventory squeeze

  • "Inventories are still quite low on exchanges. That gives good indication that manufacturing demand for copper is present and that its not just a speculative story,".
Updated 09 Feb, 2021

LONDON: Copper prices rose on Monday, underpinned by thinning inventories that pointed to higher demand for the industrial metal and by optimism over the prospect of a massive U.S. COVID-19 aid package.

Three-month copper on the London Metal Exchange (LME) gained 1.9pc to $8,062 a tonne by 1738 GMT.

"Inventories are still quite low on exchanges. That gives good indication that manufacturing demand for copper is present and that its not just a speculative story," said Nitesh Shah, an analyst at investment manager WisdomTree.

SPREADS: The premium for nearby metal over the three-month delivery has jumped to its highest since September 2020, indicating concerns over immediately available supply.

INVENTORIES: Stocks of copper across the LME, Comex and ShFE markets are at multi-year lows.

This is despite the approaching Lunar New Year holiday in top consumer China, when demand is seasonally low.

Meanwhile, ShFE stocks of metals including zinc, tin and aluminium have climbed.

"Recent stock builds across the ferrous and LME landscape are a seasonal pattern ahead of Chinese New Year, although this year the increases are actually lighter than is normally seen, painting a picture of remaining strong demand," said Alastair Munro at broker Marex Spectron.

CHINA PREMIUMS: Premiums to import cathodes from bonded warehouses into China have surged 59pc since November to six-month highs of $73 a tonne, underscoring strong demand for physical metal.

U.S. STIMULUS: Hopes for the passage of a $1.9 trillion COVID-19 aid package in the United States rose after weak jobs data showed the U.S. labour market recovery is stalling.

SUPPLY: Peru's copper production plunged 12.5pc to 2.15 million tonnes in 2020, the Energy and Mines Ministry said on Monday, due to coronavirus-related restrictions.

TIN SQUEEZE: A shortage of tin is fuelling a premium of LME cash tin over the three-month price. It was last at $1,000 per tonne after hitting a record high of $1,485 last week.

OTHER METALS: LME aluminium rose 0.6pc to $2,027.50 a tonne, zinc shed 0.5pc to $2,651, lead added 1pc to $2,073, tin slipped 0.5pc to $22,965 and nickel was up 0.8pc at $18,175.

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