The copper price hit a three-month high on Thursday (June 29), supported by expectations of stronger demand from top consumer China and a weaker dollar.
LME copper ended up 1 percent, at $5,940 a tonne, after touching $5,963.50, its highest since the end of March.
“We are relatively upbeat about our view on China and that will support copper against a backdrop of relatively tight supply conditions. Electricity consumption in China is strong, normally a good indication of copper demand,” Oxford Economics commodities analyst Dan Smith said.
China’s power consumption rose 6 percent in April from a year earlier, fueling positive investor sentiment towards the red metal, which is extensively used in wiring. The Asian country accounts for nearly half of global copper demand, estimated at about 23 million tonnes this year.
The new data adds to positive Chinese economic numbers for May, when exports grew 8.7 percent in dollar terms and imports climbed 14.8 percent. Those figures suggest that the country’s economy might be stronger than estimated by analysts.
A softer US dollar also helped copper, as a lower greenback makes industrial metals priced in dollars cheaper for holders of other currencies. That could potentially boost demand.
The dollar index, which tracks the greenback against a basket of six major rival currencies, fell to a nine-month low on Thursday. Traders at Citi called the currency reaction “extraordinary,” with turnover as much as twice the daily average on Wednesday (June 28).
Another factor impacting the copper price is decreasing stocks in LME warehouses, which are down more than 30 percent since early May, at 243,000 tonnes. SFE stockpiles are also plummeting, down more than 40 percent since early April to near 185,000 tonnes.
Adding to increasing copper supply concerns, a report released by the International Copper Study Group last week shows that the global refined copper market was in deficit by 5,000 tonnes in March; that’s compared to a 102,000-tonne surplus in February.
That said, most analysts are cautiously optimistic about copper in the long term. In a recent interview, mercenary geologist Mickey Fulp said that even though he is a short-term bear in the copper market, there could be a copper shortage in the years to come. Click here to watch the full interview.
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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.