London — The copper price bull run has continued in the New Year, with the London Metal Exchange cash benchmark surging to $8,146/mt Jan. 8, the highest closing since February 2013, S&P Global Market Intelligence said.
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The bullish investor sentiment for copper was stoked by news of supply disruptions in Peru, a major US coronavirus relief package passing into law, the Democratic Party gaining control of the US Senate and optimism over the global coronavirus vaccine rollout, which is fueling hopes for a stronger global recovery as 2021 progresses, MI said Jan. 14.
Continued dollar weakness also boosted investor appetite for copper into the New Year. The near-term downside risk for copper prices is heightened, however, by the emergence of new, more transmissible variants of COVID-19, which have triggered new lockdown restrictions across Europe and parts of the US.
These concerns, coupled with fresh virus outbreaks in China, a strengthening dollar and the annual rebalancing of commodity indexes by investor funds, weighed on copper prices Jan. 11, which fell back to $7,952/mt.
* LME copper prices surged to $8,146/mt Jan. 8, the highest closing since February 2013, before pulling back to $7,952/mt Jan. 11. Prices are up from $7,644/mt on Dec. 1, 2020.
* Investor sentiment is being buoyed by optimism over the global coronavirus vaccine rollout, the US coronavirus relief package and the Democratic Party gaining control of the U.S. Senate. This was tempered by rising coronavirus cases in China and tightening lockdown restrictions in Europe.
* Copper prices have also been supported by a weaker trade-weighted dollar index, which fell to 90.07 Jan. 8 from 91.31 Dec. 1, 2020.
* Chinese copper demand has been boosted by a 7% year-on-year increase in industrial production in November and strong recoveries for automotive and white goods sales. We forecast Chinese refined copper consumption to grow by 1.6% in 2021, following a 9.4% rise in 2020.
* The global refined copper market balance is poised to move into a growing deficit, with the vaccine rollout expected to fuel a recovery in ex-China copper demand through 2021.
* Our average annual copper price forecasts were upgraded to $6,808/mt for 2021 and to $7,715/mt in 2025, supported by a tightening market balance.
S&P Global Market Intelligence is a separately managed division of S&P Global.