Copper prices in the London market surged to their highest level in more than two years on Tuesday, driven by the appreciation of the renminbi and concerns about increased supply disruption risks.
Lundin Mining Corp. (Lundin Mining Corp.) plans to suspend operations at a Chilean mine because it failed to reach a wage agreement. This is the company's second union strike. They joined another union member who went on strike on October 8. At the same time, the renminbi exchange rate soared further this week to the highest level since July 2018, boosting the purchasing power of Chinese bulk commodity consumers.
The London Metal Exchange (LME) benchmark copper futures rose 1.7% on Tuesday to $6,898 per ton. Earlier in the session, copper prices hit a 28-month high of $6937.5 per ton, which has risen by nearly 60% since March. "The fall in the U.S. dollar has pushed copper prices higher," said a metal trader. "The data we have seen on China's economic growth and industrial activity are bullish for industrial metals."
The International Copper Study Group said on Monday that the copper market is already tight, and copper mine output is expected to decline for the second consecutive year in 2020.
Analysts at TD Securities said in a report that the reduction in global copper supply due to the pandemic-induced shutdown and concerns about further disruptions caused by the increase in global new crown cases continue to push up copper prices.
"Supply is difficult to rebuild," Frank Cholly, an analyst at RJO Futures, said by phone. "It takes time to make up for the loss of supply, especially when we see a rebound in demand from China, and all this has been reflected in the price."
Signs of progress in the US negotiations on the stimulus package and efforts to develop a new crown vaccine have also boosted metal prices. The Speaker of the US House of Representatives, Nancy Pelosi, said on Tuesday that she is hopeful that this week will reach an agreement on a stimulus package, which is essential for passing relevant bills before the election. According to the “Wall Street Journal” report, Moderna’s chief executive Stephane Bancel said that if the company’s vaccine achieves positive interim results in a large-scale trial in November, the United States may approve emergency use of the vaccine in December.
Geordie Wilkes, head of research at Sucden Financial, said in an online briefing, “Under such a huge monetary policy, the U.S. dollar has reason to weaken. It seems that as the U.S. dollar weakens and Chinese demand continues to be strong, we will test the level of $7,000.”
Karen Jones, head of the technical analysis research team at Commerzbank, said that after LME copper breaks through the September high of $6,877.50/ton, it will directly hit the key psychological barrier of $7,000, and it may also touch the December 2017 high of $7312.50 and 2018. The June high of $7,348.
In addition to copper prices, most other metal prices in the London market also rose on Tuesday. Nickel prices rose 2.2%, zinc prices rose 1.6%, and aluminum prices fell 1%. The LMEX metal index rose to its highest level since July 2018.
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