Copper climbed to the highest level since 2012 as a risk-on mood across global markets helped to lift equities and put pressure on the dollar.
Prices have soared on optimism that the use of coronavirus vaccines will aid a rebound in global growth. Copper climbed 5.3% last week on the London Metal Exchange, in the biggest gain since July.
The metal used in pipes and wires edged higher Monday even as public holidays in China and the U.S. contributed to thin trading conditions. While new Covid-19 variants are threatening to temper the outlook, investors are banking on U.S. government spending and the coronavirus vaccine rollout to boost the economic recovery.
“There’s a risk-on mood across the whole market, whether it be oil, equities or metals,” Colin Hamilton, managing director for commodities research at BMO Capital Markets Ltd, said by phone from London. “It’s one of those markets where even bad news is good news.”
LME prices have rallied strongly during the closure of Chinese markets for the Lunar New Year holidays, and investors expect that the usual dip in factory output over the period may be less severe this year owing to restrictions on travel.
U.S. markets are shut for Presidents’ Day on Monday, while exchanges in China, Hong Kong and Taiwan are also closed. Chinese markets will reopen on Thursday.
Copper climbed as much as 0.9% to $8,406 a ton on the London Metal Exchange, the highest level since 2012, before paring gains to close at $8,394 a ton. Tin paced gains in most metals, closing 3.1% higher after an unprecedented spike in spot contracts.
Production guidance from the top 25 copper producers indicates the market may be in a sizable deficit this year, “assuming our scenario of 5% demand growth is in the ballpark,” according to Bloomberg Intelligence analysts Grant Sporre and Andrew Cosgrove. Copper’s on course in February to post an 11th monthly gain.
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Copper is “being driven by a cocktail of positive factors -- including rising inflation expectations caused by U.S. stimulus, a falling dollar, and historically low stocks,” said Gavin Wendt, a senior resource analyst at MineLife Pty. “The 2021 copper production outlook is likely to be negatively impacted as a result of Covid in a number of major South American producing nations.”
— With assistance by Swansy Afonso
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