Copper extended its rally on Monday as stronger demand signals from China supported prices, while broader markets continued to shrug off last week’s Federal Reserve interest rate hike.
The industrial metal is coming off another strong week, marking its 11th weekly gain in 12 weeks.
On Monday, the benchmark three-month copper contract on the London Metal Exchange (LME) rose to nearly US$14,650 ($20,563) per tonne, bringing it about US$225 short of the record US$14,875 reached earlier this month.
Chinese demand catalyses rally
A key driver of copper’s recent strength has been firm demand from China, the world’s largest consumer of the metal.
The Yangshan copper premium, a closely watched indicator of Chinese demand for imported copper, ended last week at US$124 a tonne, its highest level in nearly four years.
Several Chinese copper refineries are scheduled to undergo planned maintenance between October and November, potentially limiting growth in refined metal availability, according to Shanghai Metals Market (SMM).
According to SMM, uncertainty also remains over the pace of imported supplies due to port congestion in Shanghai.
The Fed hike also removed a near-term uncertainty in the copper market, according to analysts at Chinese broker Everbright Futures, a subsidiary of Everbright Securities (SSE:601788).
They also noted that extreme mine-side tightness and ultra-low Chinese domestic inventories continued to provide a floor for prices ahead of next week’s National Day holiday.
Oil retreat adds support
Lower oil prices also provided support for copper on Monday, with Brent crude falling towards US$100 per barrel and reaching its lowest level in 11 days.
The decline came despite the US and Iran exchanging fresh threats over the weekend amid the ongoing Middle East conflict.
US President Donald Trump said he would be open to meeting Iranian President Masoud Pezeshkian, who is expected to attend the UN General Assembly in New York this week.
The conflict has weighed on the global economic outlook and commodity markets, particularly through its impact on energy prices and inflation.
Copper has nevertheless strengthened in recent months, partly as speculation over potential US tariffs on refined copper triggered a surge in shipments to the US and tightened supplies elsewhere.
That trade has lost some momentum amid uncertainty over the timing of any potential tariffs and hawkish signals from the Federal Reserve, although copper prices remain close to record levels.
Write to Jackson Chen at Mining.com.au
Main Image: mm-j | Flickr, under CC BY-NC 2.0 license
