Copper extended its rise on Tuesday and is now closing in on a fresh all-time high, with a rebound in Chinese demand and concerns over global supplies both serving as catalysts for the rally.
Prices in London rose another 2%, briefly touching the $14,000/t before paring gains. That marked the first time copper had risen above that level since reaching a peak of $14,500/t back in January.
The metal, often viewed as a bellwether for the global economy, has picked up momentum in recent weeks amid a confluence of tailwinds, such as a recovery in demand from top consumer China. Recent data shows that China's copper inventory has been declining, a sign of demand picking up, while its state-owned trading company also gave a healthy demand forecast for the next decade.
While satellite data from Earth-i's showed a major decline in copper smelting activity last month, that should not come unexpected given the seasonality trends, as the second quarter is usually used for maintenance before orders ramp up again in the third quarter.
Meanwhile, supply risks have also intensified amid the ongoing war in the Gulf region, as a squeeze on supplies of Middle Eastern sulfur is expected to impact global output. Sprott estimates that roughly a fifth of the world's mined copper relies on sulfuric acid as an input in production. Also driving the rally was worries about fuel availability in Peru, a major copper-mining hub.
These tailwinds have offset concerns over the economic fallout of the Iran war, given copper's role as a key industrial metal. However, analysts at Sprott point to the clean energy transition as a major source for copper demand moving forward, overshadowing its traditional end-uses.
Data center infrastructure and the energy transition are all set to significantly outpace the growth projected for core economic uses, the firm said. “By 2040, these strategic segments could account for 45% of total copper demand, up from 32% in 2024,” it predicts.
Prices have so far recovered from a 10% drop during the first month of the conflict. For the year, the red-colored metal has gained 9.3%.
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