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Copper touches highs not seen since Jan 2014

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Copper touches highs not seen since Jan 2014

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President-elect's policy gives further sentiment boost

Supply side looking constrained

London — The London Metal Exchange three-month copper price continued to trade comfortably above $7,000/mt as the bulls continued to circle the metal.

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Since the pandemic lows seen back in March, when copper went down to around $4,370/mt, the industrial metal has been powering forward. Early on in the session Nov. 25 the metal hit $7,360/mt -- levels last seen in Jan. 2014 -- and then gave back some of those gains.

A number of factors have helped copper gains, including supply-side issues, a weaker dollar, record-breaking US stock markets and demand from the booming renewable sector.

One broker told S&P Global Platts Nov. 25 that, although he hasn't seen any fresh news, he sees a solid set of fundamentals supporting copper.

"Vaccine optimism, a weaker dollar, stimulus measures [all equate to] strong demand. [Also] people [are] worried about supply which is [another] factor," he said.

Copper prices will average $2.90/lb during 2021 as both demand and surplus bounce back in the wake of the global coronavirus pandemic, Chilean Copper Commission Cochilco predicted Nov. 23.

Chile is the world's number one copper producing nation.

The figure is above the predicted average for this year of $2.75/lb but below the two-year high of almost $3.30/lb reached in recent weeks.

Global copper demand will rise next year by 2.9% to 23.995 million mt driven by steady demand in China, which consumes more than half the world's copper, and sharp recoveries in Europe and India, the commission said.

Biden election, bullish copper

Thomas Rutland, copper analyst at S&P Global Market Intelligence, said, "The dollar has weakened as the president-elect is likely to implement policies that investors view as dollar-negative, such as robust fiscal stimulus. Given the strong negative correlation the dollar has with metal prices, this has had a positive impact on copper prices and will likely continue to do so."

He added that, "there has also been more improved sentiment surrounding copper due to Biden's green agenda and the likely positive impact of him promoting renewable energy sources."

President-elect Joe Biden has selected former Secretary of State John Kerry to serve as a presidential international envoy for climate change issues as the incoming administration seeks to reposition the US as a leader in the fight against global warming.

Kerry, who represented Massachusetts as a US senator before joining the Obama administration in 2013, was one of the nation's chief negotiators behind the 2015 Paris Agreement on climate change.

While outgoing President Donald Trump officially pulled the US out of the Paris deal on Nov. 4, Biden has promised to begin the process of rejoining the accord as soon as he is sworn in as president in January.

"America will soon have a government that treats the climate crisis as the urgent national security threat it is," Kerry said on Twitter after the announcement. "I'm proud to partner with the president-elect, our allies, and the young leaders of the climate movement to take on this crisis as the President's Climate Envoy."

Renewables a demand boost

Christopher LaFemina, commodities analyst at brokerage Jefferies, said that the shift from coal and gas power to wind and solar power is "a positive for copper as renewable power systems are at least 5x more copper intensive than conventional power."

He said in a detailed research note that "in our base- and bull-case scenarios, copper demand will significantly exceed supply starting in 2021. Shortages should lead to substantially higher prices."

A second broker said that increased demand will be met with little new supply of the metal.

"[There's no] proper investment in greenfield or brownfield projects, copper [is] being mined to the hilt, [coupled with] depleting ore grades and concentrate shortages," he said.