Copper prices continued their rally on Monday, jumping to the highest in eight years since 2012, driven by concerns over market deficit due to the surge in demand and tight supply. On the Comex, Copper contracts edged up 1.0% to $8,436 per tonne by noon EST.
Highest price since 2012
The base metal has currently hit its eight-year high and has gained more than 8.8% since the start of the year. Copper is also on track for its 11th straight monthly gain.
Copper prices were driven by rising inflation expectations triggered by US stimulus, a falling dollar, and historically low stocks.
Tight supply, high demand
The demand for copper remained elevated in the world’s top consumer, China, despite the Lunar New Year holiday. It has been speculated that more factories have remained open during the Lunar New Year holiday in China, typically a slow period of industrial activities.
Gavin Wendt, a senior resource analyst at MineLife Pty said that the copper stocks are also at historic lows due to covid in a number of major South American producing nations.
A shortfall of half-a-million tonnes
According to Bloomberg Intelligence analysts Grant Sporre and Andrew Cosgrove, the market may be in a sizable deficit this year. This conclusion was based on the production guidance from the top 25 copper producers and 5% demand growth expected for copper.
The analysts said that the aggregated mined supply guidance nearly 400,000 tonnes less than that of BI estimates, implying a shortfall of close to half-a-million tonnes.