LONDON: Copper rose to a fresh 9-1/2 years high on Wednesday on a weaker dollar, low inventories and hopes that the metal will benefit from higher demand as major economies recover from the impact of the coronavirus. Benchmark three-month copper on the London Metal Exchange (LME) climbed 1.6% to $9,353 per tonne by 1722 GMT, its highest since August 2011. It logged its fifth straight session of gains.
“After looking at the macro background, I think there could still be legs in (the copper price rally) during the next three months or so,” said ING analyst Wenyu Yao.
“The macro story of strong growth and higher inflation is likely to be the main theme.”
Low global inventories of copper - which is used in power and construction - and rebounding demand in Europe and the United States have boosted the price in recent sessions.
On Wednesday, Germany’s economy beat growth expectations due to strong exports and solid construction activity.
But Capital Economics analyst James O’Rourke warned that base metals prices would fall by year-end, “as the gradual withdrawal of fiscal stimulus in China weighs on economic activity, and subsequently, base metals demand”.
The dollar was softer, making assets priced in the greenback more appealing. On-warrant LME inventories of copper - those not earmarked for delivery and available to the market - rose 17% to 54,550 tonnes. But visible stocks of the metal are dwindling globally, a sign of healthier demand. The premium for cash copper over the three-month LME contract fell to $31.50 a tonne from a high of $49.50 on Friday.
The LME net spec long is at its highest since 2017 at 55% of open interest as of Monday, according to estimates by broker Marex Spectron. Norilsk Nickel said it had partially suspended operations at its Oktyabrsky and Taimyrsky mines in Siberia because it had detected an inflow of water underground. The mines produce nickel, palladium, copper and platinum.
LME aluminium was up 1.8% to $2,186 a tonne, zinc slipped 0.4% to $2,866, lead was up 0.3% to $2,128, tin added 1.1% to $26,800, and nickel rose 1.7% to $19,680.