(Bloomberg) — Copper rallied to $9,000 a ton — its highest level in 11 months — on bets that a pick-up in global manufacturing activity will push up demand for industrial commodities.
Most Read from Bloomberg
The metal, seen as a bellwether of the global economy, has surged this week as investors warm to the idea that the worst of a global downturn is past. Commodities are “in the first throes of a cyclical upswing,” Macquarie Group Ltd. said in a note.
Optimism about copper demand is accompanied by emerging supply stress. Smelters in China this week held a crisis meeting on how to cope with a sharp drop in the fees they get from processing ore — a sign that mine supply is falling short of what the plants want to produce.
A market deficit is expected this year for both concentrates and the refined metal, with a drop in smelter output “following another year of disappointing mine supply,” Macquarie analysts led by Marcus Garvey said. The bank sees prices peaking at $9,500 a ton in the third quarter.
Global refined copper output may rise by 2.1% this year, lower than previously expected due to the shortage of concentrates, they said. However, the cuts by Chinese smelters may be limited, they said.
Funds are also making bullish bets on copper as global mined supply tightens and Chinese demand slowly recovers, said Zhan Dapeng, an analyst at Everbright Futures Co.
Copper rose as much as 1.5% to $9,020 a ton on the London Metal Exchange, before trading at $9,002 a ton by 1:37 p.m. Shanghai time. It is up 5.1% this week.
–With assistance from Atul Prakash.
Most Read from Bloomberg Businessweek
©2024 Bloomberg L.P.