LONDON: London copper touched a more than two-year high on Wednesday, aided by a weaker US dollar and bullish demand outlook, while prices on the CME hit a record high, keeping the unusually large price spread between the two in focus.
Three-month copper on the London Metal Exchange (LME) rose 0.8% to $10,196.5 per metric ton by 1417 GMT after hitting $10,401.25, its highest since April 2022.
Copper, used in power and construction, is up 19% so far this year and is $650 away from the record high of $10,845, hit in 2022, due to limited supply of raw material and bets that the metal would benefit from additional demand from green energy sectors.
“Copper prices are underpinned by a softer dollar, positive investor positioning and supply side downgrades. However, China demand signals remain mixed,” said Standard Chartered analyst Sudakshina Unnikrishnan.
Some indicators for copper remain soft in China with low import premiums and inventories at the Shanghai Futures Exchange (SHFE) close to their four-year high, Unnikrishnan added. Meanwhile, the CME May contract hit a record high of$5.18 a pound and was last down 0.5% at $4.925.
Copper producers and traders have been shipping more metal to the United States to profit from higher prices for CME futures compared with LME. “CME copper seems to be short squeeze on people trading arbitrage LME vs CME, SHFE vs CME,” said a trader. Arbitrage trading exploits differences in regional prices for the same commodity. Redirection of copper to the US should ease the arbitrage dislocation, but this will take some time, Citi said in a note. As of Tuesday, the premium of the CME front month contract over the LME cash price was at a multi-decade high of over $900 per ton.
Meanwhile, LME aluminium advanced 0.7% to $2,568 a ton, zinc fell 1% to $2,975.50, lead was steady at $2,259 and tin lost 0.2% to $33,260. Nickel gained 0.5% to $19,160.
The unrest in the Pacific island of New Caledonia, one of top ten producers of nickel, has added to mine stoppages in the country’s struggling industry.
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