For the first time in nine years, the price of copper has risen above US$9,000 per metric ton, as tightening supplies and future demand growth have caught the attention of investors.
Since the beginning of the year, commodities, including metals and oil, have enjoyed a significant price rally as prospects of impending economic growth continue to rise. Since the record-lows of March, the price of copper has nearly doubled, following a rapid-tightening in physical markets, coupled with the growing expectations that the era of subdued inflation levels across major copper-producing economies may be coming to an end.
In addition, an increasing number of investors are also anticipating that the demand for copper will rise over the next several years. As OECD governments continue to inject unprecedented levels of money supply into their economies, coupled with stimulus measures aimed at renewable energy infrastructure, large quantities of copper inputs are expected to be significantly sought after. As a result, futures contracts for copper delivery in three months increased to US$9,269 per metric ton on Monday, inching closer to the record-high set back in 2011.
The physical copper market has also been the subject of tightening supply conditions, with the pressure expected to increase even further amid declining profit margins for smelters in China. Copper treatment charges, which provide insight into refining margins, fell to US$45.50 per ton— the lowest since 2012. Conversely however, the surge in prices has been beneficial to miners, causing stock prices to increase and shareholder returns to grow.
Information for this briefing was found via Bloomberg. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.