Investors propel copper towards two-year peak

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Copper prices climbed towards the two-year highs hit last month as expectations of strong demand growth and hopes for cuts to U.S. interest rates encouraged investors to pile into the market on Monday.

Benchmark copper CMCU3 on the London Metal Exchange (LME) was up 1.3% at $10,134 a metric ton by 1045 GMT after touching $10,144.50. Copper hit $10,208 on April 30 for its highest since March 2022.

Accelerating demand for copper from the electric vehicle, artificial intelligence and automation sectors in future years is expected to create significant shortages as consumers scramble to secure supplies.

The demand story is still front and centre; fund money is still coming in,” one copper trader said, adding that optimism over potential U.S. rate cuts was also boosting sentiment.

Cuts to U.S. interest rates would weigh on the U.S. currency, making dollar-priced metals cheaper for buyers holding other currencies.

Focus was also on the price differential between copper on the CME HGc1 and LME.

CME copper is trading at a $300 premium to LME copper, offering traders who expect the differential to narrow an opportunity to sell CME and buy LME.

But we would make the point that you then lay yourselves open to the threat of disruptions to shipments. Whether that is low water levels in the Panama canal. Or just South American shortages,” Marex said in a note.

Marex referenced disruptions at First Quantum’s Cobre operation in Panama, where the president-elect has ruled out talks about the closure of the mine until the Canadian company drops arbitrations proceedings.

Panama last year ordered the closure of Cobre after a court ruling that voided First Quantum’s contract after widespread national protests for more environmental safeguards and transparency.

Copper stocks in CME warehouses HG-STC-COMEX in the United States have dropped 30% to 21,530 tons since late March, suggesting end-user need for the industrial metal.

In other metals, aluminium CMAL3 was up 0.8% at $2,549 a ton, zinc CMZN3 gained 1% to $2,960, lead CMPB3 rose 0.7% to $2,237, tin CMSN3 advanced 1.3% to $32,500 and nickel CMNI3 added 0.7% to $19,090.

Source: Reuters