LONDON: Fund buying propelled copper prices to new highs on Friday, but some investors and analysts were cautious about possible output cuts in China and whether the rally would be sustained.
Shanghai copper prices hit a record high and prices in London and Chicago touched an 11-month peak after Chinese smelters agreed to trim production in the face of weak profits and losses.
Three-month copper on the London Metal Exchange had advanced 1.9% to $9,057 per metric ton by 1732 GMT, the highest since April 2023. US Comex copper futures gained 1.8% to $4.12 a lb.
“This is now being driven by hot money moving back into the market, but as we know, hedge funds are not married to a position, they will seek a divorce at any given time if things start to turn sour,” said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen. Major Chinese copper smelters have agreed to lower operation rates, adjust maintenance plans and postpone projects, state-backed research house Antaike said on Thursday, but some traders said they had doubts about any output reductions.
A bottoming in the global industrial cycle is expected to boost copper, Goldman Sachs analyst Nicholas Snowdon wrote in a note. “Previous troughs in global manufacturing cycles have been associated with subsequent sustained metals upside, with copper and aluminium rising on average 25% and 9% over the next 12 months,” Snowdon added. China accounted for 47% of the global refined copper output last year, data from the World Bureau of Metal Statistics showed.
China is also the world’s biggest copper consumer, but subdued economic growth and a lack of big stimulus support have left the demand outlook flat. “I’m a bit hesitant at this point because although the ducks are starting to line up in a row, the main one we’re missing is rate cuts, potentially driving some restocking,” Hansen said. For the rally to be extended, support levels needed to hold at $8,860 and $8,716, he added.
LME aluminium rose 1% to $2,274.50 a ton, zinc advanced 0.4% to $2,558 and tin gained 1.3% to $28,635 while nickel shed 0.9% to $17,920 and lead fell 1.4% to $2,127.50.