Copper prices closed at a 10-year high on Friday as industrial metals ranging from zinc to aluminum rose due to growing concerns that the global energy contraction will hit production.
The price of copper rose to more than US$10,000 per ton this week as traders gathered in London to participate in the industry’s annual event LME week. On Friday, the price of zinc rose by more than 10%, hitting a 14-year high, and the price of aluminum reached its peak since January 2019. The highest level. The 2008 financial crisis.
Due to the rapid increase in natural gas and coal prices, industrial metals have benefited from strong demand and supply disruptions, which have increased the cost of mines and refineries from Chile to China.
Nyrstar, one of the world’s largest zinc producers, said this week that the output of its three European smelters will be reduced by as much as 50%, while the power outage in China has affected aluminum production.
Analysts said that this supply shortage outweighs concerns about global economic growth or possible rises in interest rates.
John Browning, an analyst at BANDS Financial in Shanghai, said: “Investors are flooding into the metal market because they expect that if sentiment changes when interest rates rise, the reduction in output driven by the surge in electricity prices will exceed the potential decline in demand.”
According to data from Kingdom Futures, physical copper stocks on the London Metal Exchange fell to the lowest level since 1974 this week, indicating strong demand. Goldman Sachs stated in a recent report that metal inventories may reach historical lows before the end of the year and be “completely depleted” in the second quarter of next year.
The unspecified copper inventory in the LME registered warehouse is only 14,150 tons, down from more than 200,000 tons in September.
The trading price of spot copper contracts is nearly $100 premium over the three-month LME futures contract, the highest level in seven years. This is called an inverse spread market and is a signal of insufficient market supply.
“We are at a point where small changes in inventory levels will have an exaggerated effect on prices,” Vanessa Davidson, head of copper research and strategy at CRU, a commodity consultancy, said at the LME Weekly seminar on Monday.
Copper has also benefited in part from its increasing use of clean energy technologies such as wind turbines and electric vehicles, making it a target for speculators and mining companies.
CRU estimates that by the 2030s, the use of copper in wind turbines, electric vehicles and other “green” technologies will reach 6 million tons of refined copper, accounting for 20% of global consumption.
“These figures are very important and show how much benefit the green energy transition has for copper demand,” Davidson added.
Australian miner South32 this week Paid The acquisition of 45% of the Chilean copper mine project for US$2 billion highlights the desire of miners to increase their exposure to copper mines.
Juan Benavides, chairman of Chile’s state-owned copper producer Codelco, said that rising energy prices will increase production costs by about 6%, but added that demand remains strong.
“Obviously, people are worried about inflation, energy and logistics, but at the same time, inventories are very, very low, consumers today are financially very healthy, and banks all over the world have a lot of cash and liquidity,” Benavides Tell the financial world.
Benavides said that next year copper demand will increase by 2% to 3% and will cause a shortage of 6 million tons by the end of this decade.
“From a copper point of view, we see that all customers’ demand is tight, and we are working hard to ensure supply.”