Copper prices saw a significant increase on Monday. This increase came as the result of an industry-wide increase in demand for industrial metals including copper. China, the world’s leading copper consumer, served as the primary driver of this demand increase.
Independent analyst Robin Bhar commented on China’s impact on copper prices, saying, “The China data was pretty robust – not any great surprises there – but just confirmation that China is back on track and that is a solid underpinning for metals.”
China’s relatively rapid recovery from the ongoing Covid-19 pandemic fuelled its economic growth in the fourth quarter of 2020. In that quarter, the economy of China grew by 6.5% year-on-year. This figure exceeded the 6.1% predicted by several leading economists. Many analysts expect China’s economic growth to continue to accelerate in 2021. The country’s continued recovery from the pandemic will likely provide the catalyst to its economic success this year.
However, concerns over a resurgence of Covid-19 in China limited the extent of the copper price increase. On Monday, China reported more than 100 new Covid-19 infections for the sixth consecutive day.
Copper Prices and Stock Volume
As of 1700 GMT yesterday, the latest price increase pushed the value of three-month benchmark copper on the London Metals Exchange (LME) to US$7,978.50 (RM32,312.92) per ton. This figure represented an increase of 0.4%.
Global copper stocks saw a reduction in volume. The total stocks of copper in LME-registered warehouses dwindled to 97,675 tons. This meant that copper stocks hit their lowest point since September 2020. This stock reduction eased concerns surrounding an oversupply of copper. As a result, the LME’s cash copper discount against the three-month contract narrowed to around US$10 (RM40.50) per ton. Many experts expect this discount to continue to narrow in the near future.
On a related note, the amount of cancelled inventory reached 44%. This extremely high percentage caused many to become concerned about a possible incoming shortage of LME copper.
Aluminium Prices and Stock Volume
According to the LME’s figures, the price of aluminium fell by 0.8% to a value of US$1,975 (RM7,998.75) per ton. This came after a prolonged period during which the price of aluminium steadily rose.
The prior consistent rise in aluminium prices motivated many producers of the metal around the world to increase production. For example, China set an annual record in 2020 by producing 37.08 million tons of aluminium in that year. The country’s aluminium output in December 2020 broke the prior national record for aluminium production.
This increased output also caused global aluminium stock quantities to greatly increase. LME-approved warehouses gained an additional 112,000 tons of aluminium, bringing the total amount to 1.39 million tons.
by Weijun
19th January 2021 15:25
