May 16, 2024
Market: Copper prices reach a new all-time high in New York

Market: Copper prices reach a new all-time high in New York

(BFM Bourse) – Prices of the ordinary metal reached up to $5.128 per pound on the Nymex on Wednesday, driven by technical factors.

If the surge in gold and cocoa prices has attracted considerable attention in recent months, copper is not left out.

Prices of the base metal have jumped more than 20% since the start of the year in London and more than 26% in New York.

As John Plassard pointed out on X (ex-Twitter)The contract on the “king of green metals” in New York reached a historic high on Wednesday, at $5,128 per pound, which corresponds to $11,305.3 per ton.

In London, copper is trading this Thursday at around $10,221 per tonne, its highest for around two years.

The record reached in New York, as well as the historic price difference (more than 1,000 dollars compared to a handful of dollars usually) with the London contract, can be explained by technical factors.

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Factor Techniques

The New York copper market has been propelled by a “short squeeze”, which occurs when investors betting on the decline unwind their positions, leading to copper buybacks. In this case, these are traders who wrongly bet on a realignment of prices between the New York and London markets.

“The explosion in the spread (the price difference between copper contracts in London and New York, editor’s note) has taken major players by surprise, from Chinese traders to quantitative hedge funds, some of whom are now scrambling to find metal that they can deliver under expiring futures contracts,” Bloomberg explains.

“The price difference highlights how aggressive this squeeze is and reflects concerns that there may not be enough metal to deliver for the July Comex contract,” said Robert Rennie, head of raw materials and carbon strategy at Westpac, to the Australian Financial Review.

Reuters reported that two major commodities trading companies, Switzerland’s Trafigura and China’s IXM, were caught in the trap, and were chasing copper on Wednesday to cover their short positions.

“The” metal of the green transition

Beyond this technical increase in copper in recent days, the upward movement over the whole of 2024 was driven by fundamentals. Copper remains a base metal with multiple applications, particularly for the energy transition, with a significant presence in wind turbines, solar panels and electric vehicles.

More recently, with the rise of artificial intelligence, demand for copper is supported by the needs of data centers.

“Electrification is a key driver of copper demand” but “attention is shifting from electric vehicles (lower demand growth) to data centers,” notes Bank of America.

“The ongoing green transformation and increased use of AI applications is increasing demand from traditional sectors such as housing and construction,” said Ole S Hansen, head of commodities strategy at Saxo Bank. , in April.

UBS estimates that global copper consumption will increase this year by 3.3% compared to 2023.

Tensions on supply

At the same time, tensions appear on supply. “Several mining companies have announced production cuts due to factors such as rising input costs, falling ore grades, increased regulatory spending and weather-related disruptions,” explains Ole S Hansen . .

Demand “will require higher prices to incentivize miners to increase production who, in some cases, face a twelve-year period of uncertainty between discovery and production of the first metal,” he adds. -he. -he.

Goldman Sachs raised its forecast for a deficit between supply and demand at the beginning of May, putting it at 454,000 tonnes this year and 467,000 tonnes the following year. This mismatch must logically lead to an increase in prices to destroy demand.

15,000 dollars per ton in 2025?

The promising prospects for copper have also received an unexpected spotlight this year through a consolidation operation between two giants of the mining sector. The Australian-British BHP has been trying for several days to buy the British Anglo American, which has so far refused to give in to its advances, despite a final offer of 43 billion dollars.

“As part of its strategy to expand its assets in the copper sector, BHP intends to acquire Anglo American, given the significant growth potential for copper in the future, as the “There is a shift towards replacing conventional fossil fuels with the growing adoption of electric vehicles and growing demand for its use in construction and renewable energy projects,” commented Sathiya Narayanan Jalapathy, analyst at GlobalData.

Can copper go even higher? UBS forecasts a price in London of $10,500 per tonne in December. For its part, Goldman Sachs raised its forecasts at the beginning of May, counting on a price of 12,000 dollars per tonne at the end of the year, before 15,000 dollars per tonne, on average, over the whole of 2025.

Julien Marion – ©2024 BFM Bourse

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