On January 21, 2023, copper prices experienced a rebound following a significant drop in the prior session. Investors are keeping a close eye on inventory levels outside the U.S., although there are growing concerns about the sustainability of demand.
The benchmark three-month copper price on the London Metal Exchange increased by 0.4%, reaching $12,796 per metric ton at 1700 GMT. This rise came after a 1.6% decline on Tuesday, although just a week ago the metal had peaked at a record $13,407.
Neil Welsh, head of metals at Britannia Global Markets, noted in a report, “While the broader base metals sector remains volatile, ongoing structural tightness continues to support prices.”
On Tuesday, the premium for the cash LME copper contract over the three-month forward soared to more than $100 per ton, reflecting robust demand for immediate metal. However, this spread shifted to a discount of $23.50 per ton by Wednesday.
UNCERTAINTY ABOUT THE SUSTAINABILITY OF THE RALLY
Market sentiment is mixed as Dan Smith, managing director at Commodity Market Analytics, expressed concerns regarding the global geopolitical climate. Following statements from U.S. President Donald Trump about potential tariffs on European allies, market participants are increasingly cautious.
Smith commented on copper’s recent movements, stating, “I’m somewhat skeptical about this rebound.” After a morning rise of up to 1.6%, he added that his trading algorithms are now indicating a sell signal, suggesting that any upwards momentum may be short-lived.
This recent surge in copper prices has begun to impact demand in China, the world’s largest metal consumer. The Yangshan copper premium, which measures China’s appetite for copper imports, plummeted to $22 per ton, marking its lowest level in almost a year and a half.
“The macroeconomic picture in China appears robust, but high copper prices can lead to weakened demand if not managed carefully,” Smith explained. In December, China exported 96,000 tons of refined copper, a decrease of approximately one-third from the record shipments in November, yet still over five times higher than the same period last year.
Additionally, tin emerged as the biggest gainer on the LME, rising 3.9% to reach $51,000 per ton, largely due to Indonesia’s crackdown on illegal mining activities. Nickel also experienced a boost, increasing by 2.3% to $17,995.
Overall, aluminum inched up 0.5% to $3,124, zinc saw a modest gain of 0.2% to $3,178.50, while lead dipped by 0.2%, settling at $2,024.
In summary, while copper prices are experiencing fluctuations influenced by several factors—including geopolitical tensions and shifting demand in China—investors remain attentive to market dynamics and inventory trends.
Reporting by Tom Daly; additional reporting by Lewis Jackson and Dylan Duan; editing by Paul Simao and Barbara Lewis
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