LONDON: Copper pulled back after breaching the $8,000 a tonne level on Friday as some investors were cautious due to a tapering off of physical demand at high prices. Copper has joined stocks and other risk assets in buoyant gains in recent weeks, lifted by optimism about global economic recovery after positive news about COVID-19 vaccines.
Warning signals are flashing, however, since the most recent extension of copper's rally has been dominated by speculators, not buying from industrial users, said Gianclaudio Torlizzi, partner at consultancy T-Commodity in Milan.
"We think the market is driving higher only from financial euphoria. The industrial Chinese buyers are not buying this spike and this real time indicator has been stalling over the last two weeks," he said.
"Demand is not going along with the price, so I'm starting to be sceptical about this rally and I'm taking this upside in prices as a very good opportunity to short the market."
Three-month copper on the London Metal Exchange had gained 0.8% to $7,982 a tonne by 1655 GMT after touching $8,028, its highest since February 2013.
On the Shanghai Futures Exchange, copper leaped to a more than nine-year high of 59,500 yuan ($9,095.36) a tonne.
Both the LME and ShFE contracts are set for their seventh straight weekly gains.
Dwindling inventories have also supported copper prices. ShFE stocks dropped to their lowest since December 2011 at 74,222 tonnes on Friday.
Combined stockpiles of the metal LME, ShFE and COMEX warehouses were hovering near their lowest since December 2014 at 281,648 tonnes as of Dec. 17, Refinitiv Eikon data showed.
LME inventories of lead extended their rise on Friday to the highest since Oct. 9, having jumped by 20% over the past week. LME three-month lead dipped 0.2% to $2,037 a tonne.
Chilean miner Antofagasta agreed to supply copper concentrate to smelters in China and Japan at treatment charges of $59.50 per tonne in 2021, sources said.
LME aluminium rose 0.2% to $2,057 a tonne, zinc added 0.3% to $2,864 and nickel slipped 0.1% to $17,495. Tin pulled back 0.2% to $19,960 after touching $20,245, the highest since April 2019.