Financial Services Association, April 22 (Editor: Xiaoxiang) As expectations for global economic recovery continue to increase demand for industrial raw materials, the price of copper is moving further towards a milestone mark after opening on Monday: the 10,000 US dollar mark!

According to market data, the price of LME copper continued to rise after the opening of the day, hitting a high of 9,988 US dollars, continuing to reach a high level of nearly two years, and is only one step away from the 10,000 US dollar mark. Industrial metal prices have generally risen in recent weeks, as signs of improvement in manufacturing activity from the US to China have boosted demand, and stubborn inflation has also attracted new bets that the commodity market will continue to be popular.

Federal Reserve Chairman Powell said last week that the Federal Reserve may take “longer than expected” to ensure that inflation is under control.

Judging from the trend during the year, LME copper has accumulated a cumulative increase of more than 16% so far this year, and most of this increase was achieved this month.

Commodity market analyst Jake Lloyd-Smith said that the surge in copper prices continued at an accelerated pace this month and is now on the verge of returning to 10,000 US dollars per ton. The rise in copper prices appears to be due to the still-stable macroeconomic data in the US and prospects for an improvement in China's manufacturing industry. Also, everyone sees copper as an important cornerstone of the energy transition. This makes for a very attractive demand-side context.

Lloyd-Smith also mentioned some of the current supply-side problems facing the copper market, in particular the closure of a major copper mine in Panama, sluggish production by Chilean company Codelco, and the suspension of operations of a project in the Democratic Republic of the Congo. He said that from a broader perspective, the industry has continuously warned that the construction of large-scale mines is becoming more difficult and more expensive.

Last Friday's news showed that due to the March mine accident, Chile's national copper company Codelco said its copper production is expected to decline in April, which further raised market concerns about insufficient copper supply. Chile's Minister of Mines Aurora Williams said, “We have deployed contingency plans and are expected to resume production in the third quarter of this year.”

Last month, due to an accident, Codelco's Radomiro Tomic mine suspended most of its mining activity, reducing production to its lowest level in 20 years. Ricardo Torrejon, head of the mine's trade union, said that currently only about one-third of the mining carriers at the Radomiro Tomic mine are in operation, and it is expected that normal operation will gradually resume until early May.

$10,000 “milestone”

It is worth mentioning that against the backdrop of the continuous sharp rise in copper prices over the past few weeks, the net long position size of Luntong established by asset management companies has set a new record. Long positions on the Chicago Mercantile Exchange (CME) copper futures contract were also at their highest level in January 2018.

At the beginning of this year, although quite a few industry organizations predicted that the copper price would rise above 10,000 US dollars, apparently few people anticipated that the copper price would reach that “Xiongguan” soon. Currently, many institutions have further raised their expectations for copper prices as a result.

Goldman Sachs Group strategist Nick Snowdon recently said that the latest rise in copper prices is only “a small hill on its way to Mount Everest,” and there will be a “very serious” gap in refined copper supply. He predicted that the average copper price next year would reach an astonishing $150 million per ton.

Jeremy Weir, CEO of Tork Group, also pointed out that in order to fill the potential 8 million tonne supply gap by 2034, mining companies need copper prices higher than 10,000 US dollars per ton, or even as high as 12,000 US dollars.

Ole Hansen, head of commodity strategy at Saxo Bank, said in a report that several mining companies have announced lower production ratings due to various factors, including increased input costs, declining ore grade, and weather-related disturbances. He pointed out that the green transformation and increased use of artificial intelligence applications are increasing demand for copper in traditional industries such as construction, and prices are likely to hit a new record high in the second half of this year.

Of course, after the rapid rise in copper prices in the short term, many industry insiders are now more cautious. Last week, the annual World Copper Conference and Cesco Copper Week were held for the first time in Santiago, Chile. Bank of Montreal Capital Markets summed up the conference atmosphere as “active but not bullish” in a research report on the industry's event on Friday.

Participants generally agreed that although most market participants were happy with the rise in copper prices over the past month, the recent rise in copper prices may have slightly surpassed fundamentals.

“We believe this (the sharp rise in copper prices) reflects the large amount of capital flowing into the copper market and that commodities are an asset class, and many producers want to learn more about this dynamic. Some believe demand will improve further to support current price levels, but if this does not happen soon, recent gains may prove weak,” the Bank of Montreal capital market said.