Copper prices resumed their rally on Monday, reaching the highest level since 2012, on concerns over a market deficit driven by tight supply and strong demand for the industrial metal.
There has also been聽speculation聽that more factories in China, the world鈥檚 top consumer, have remained open during the Lunar New Year holiday, keeping copper demand elevated during what is normally considered a slow period of industrial activities.
Copper contracts advanced 1.0% to $3.8265 per pound (about $8,436 per tonne) by noon EST on the Comex. The base metal is on track for its 11th straight monthly gain and is up more than 8.8% since the beginning of the year.
Grant Sporre and Andrew Cosgrove, assuming their scenario of 5% demand growth is in the ballpark, production guidance from the top 25 copper producers indicates the market may be in a sizable deficit this year.
Aggregated mined supply guidance is more than 400,000 tonnes shy of BI estimates, the analysts said, suggesting a shortfall close to half-a-million tonnes.
Copper is 鈥渂eing driven by a cocktail of positive factors 鈥� including rising inflation expectations caused by US stimulus, a falling dollar and historically low stocks,鈥� said Gavin Wendt, a senior resource analyst at MineLife Pty.
鈥淭he 2021 copper production outlook is likely to be negatively impacted as a result of covid in a number of major South American producing nations,鈥� Wendt added.
(With files from Bloomberg)