LONDON: Copper prices rose on Wednesday as traders hoped a pullback from 10-year highs had run its course and the metal’s spectacular rally would resume.
Strong demand from China and expectations of years-long supply shortages encouraged a wave of speculative buying that drove prices to $9,617 on Feb. 25, their highest since 2011.
The rally was punctured by fears that a speculative bubble was forming and a spasm of caution on wider markets caused by a spike in US bond yields, but prices have begun to recover from a low of $8,570 last week.
At 1710 GMT, benchmark copper on the London Metal Exchange (LME) was up 0.9% at $8,862 a tonne.
“The rally in many ways is justified,” said WisdomTree analyst Nitesh Shah, predicting prices of $10,000 and above.
“There isn’t a form of renewable energy that doesn’t require more copper than traditional fossil fuels.”
Global stock markets rose, lifted by a stunning rebound in US tech shares, while the dollar strengthened slightly.
Strong factory data in China and France pointed to solid demand for metals.
Speculators have reduced bets on higher metals prices.
The net long position in LME copper fell to 43% of active contracts on Monday from 62% on Feb. 25, broker Marex Spectron said, while a Chinese brokerage cut a long position worth more than $1 billion by almost 25%.
“Metals can resume their rallies having seen such a big clearout,” Marex’s Alastair Munro said in a note.
Copper prices on the Shanghai Futures Exchange fell as traders fretted about a possible tightening of Chinese monetary policy.
Workers at Antofagasta’s Los Pelambres copper mine in Chile rejected a contract offer, increasing the likelihood of a strike.
Copper output in Peru could hit a record 2.5 million tonnes in 2021, a government minister said.
LME tin rose 2.7% to $25,100 a tonne as the premium for cash metal over the three-month contract rose back towards last month’s unprecedented highs, suggesting an acute shortage of near-term material.
Benchmark aluminium was flat at $2,168, zinc fell 0.5% to $2,762.50, nickel rose 0.1% to $16,095 and lead was 0.8% down at $1,950.
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