Copper Surges to Two-Year High With Risks to Supplies Widening

Copper surged to its highest price in more than two years in London, helped by a rally in the yuan and concerns over risks of widening supply disruptions.

Lundin Mining Corp. planned to suspend operations at a mine in Chile with a second union striking after failing to reach a wage accord. They join members of another union who downed tools Oct. 8. China’s yuan surged to the highest since July 2018, boosting the buying power of commodities consumers in the country.

The copper market is already tight, with mine output expected to drop for a second consecutive year in 2020, the International Copper Study Group said Monday. Decreases in copper’s global supply caused by pandemic-related shutdowns, as well as fears for further disruptions as coronavirus cases increase worldwide, continue to drive the metal higher, analysts at TD Securities said in a note.

Copper Surges to Two-Year High With Risks to Supplies Widening

“Supply is not easily rebuilt,” RJO Futures analyst Frank Cholly said by phone. “It takes time to make up for lost supply, especially with the demand we’re seeing out of China, and it’s all getting priced in.”

Copper Surges to Two-Year High With Risks to Supplies Widening

Signs of progress in U.S. stimulus negotiations and efforts to develop a vaccine for Covid-19 also buoyed metals. House Speaker Nancy Pelosi said that a bill for a compromise stimulus package is being written as she awaits a key phone call with Treasury Secretary Steven Mnuchin later Tuesday. Moderna Inc. Chief Executive Officer Stéphane Bancel said the U.S. could authorize emergency use of its vaccine in December if it gets positive interim results in November from a large trial, the Wall Street Journal reported.

Copper climbed 1.8% to settle at $6,899 a metric ton at 5:52 p.m. on the London Metal Exchange after touching $6,937.50, the highest since June 2018.

“With such vast monetary policy, there is a case for the dollar to weaken,” Geordie Wilkes, head of research at Sucden Financial Ltd., said in an online briefing. “It’s looking likely that with a weaker dollar and continued strong demand from China, we’ll test that $7,000 level.”

Most other metals advanced in London, with nickel rising 2.2% and zinc up 1.6%, while aluminum fell 1%. The LMEX Metals Index rose to the highest since July 2018.

©2020 Bloomberg L.P.

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