Copper Rebounds as Demand Optimism Overcomes Fed, China Concerns

Copper rebounded from Wednesday’s slump, buoyed by expectations that demand will remain resilient in the face of possible tapering by the U.S. Federal Reserve and China’s stepped-up efforts to jawbone prices lower.

Sentiment improved with equities climbing and U.S. a report showing applications for state unemployment insurance fell last week to a fresh pandemic low. A falling dollar also helped underpin gains in metals.

Copper slid the most since October on Wednesday amid worries that inflation threatens the economic recovery. Despite the pullback, major metal producers remain optimistic. The Chilean government’s copper agency Cochilco lifted its 2021 average price projection, saying a tight market and investor flows could send the metal to new all-time highs in the short term.

“For the time being, global commodity demand signals are still firing on all cylinders, with the recent weakening still consistent with noise,” TD Securities analysts led by Bart Melek said in a note. But “the context points to risks of normalizing growth.”

Copper Rebounds as Demand Optimism Overcomes Fed, China Concerns

Minutes of the Fed’s last meeting released Wednesday indicated some Fed officials may be open “at some point” to discussing adjustments to the pace of massive bond purchases if the U.S. economy keeps progressing rapidly.

In China, the cabinet expressed concerns Wednesday about the rise in commodities prices for a second week in a row, calling for more effort to curb “unreasonable” gains and preventing any impact on consumer prices. The meeting, chaired by Premier Li Keqiang, also called for a crackdown on speculation and hoarding.

Copper rose 0.5% to settle at $10,048 a ton at 5:53 p.m. on the London Metal Exchange, after climbing as much as 1.8%. The metals slumped 3.9% on Wednesday, the most since Oct. 1. Most other LME metals advanced on Wednesday, while aluminum slipped.

Alcoa Co.’s Chief Executive Officer Roy Harvey said demand for aluminum is “firing on all engines” this year and continues to grow “really, really quickly” in China and the rest of the world.

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