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Copper’s recent surge to a record wasn’t justified by real-world supply and demand, according to Trafigura Group — the top copper trader and usually one of the market’s most bullish voices.
“Prices of non-ferrous metals have moved much higher than fundamentals in the physical spot market might indicate or justify, especially for copper,” Trafigura chief economist Saad Rahim wrote in a commentary accompanying the trader’s first half results on Thursday.
Copper prices surged to an all-time high of $11,104.50 a ton last month, but have since retreated about 10% to trade at $10,025 on the London Metal Exchange on Thursday. While investors have piled into copper futures, the market in leading consumer China has been flashing signs of weakness.
Trafigura has long been one of the copper market’s most bullish voices, with former head of copper Kostas Bintas predicting in 2021 that the metal was set for a long-term bull market that could see it hit $15,000.
Last autumn, Rahim acknowledged that the copper market hadn’t played out as Trafigura had expected, blaming dollar strength for its underperformance.
On Thursday, he attributed copper’s rally to a record to “investment flows.”
Still, he predicted that the market would tighten as a result of supply constraints, with issues such as the closure of First Quantum Minerals Ltd.’s mine in Panama triggering a record-breaking squeeze in the market for semi-processed copper ore, known as concentrates.
Disappointing mine supply “has led to a significant concentrates shortage, resulting in smelters having to cut production, and pointing to tighter inventories of refined metal even if demand is lacklustre,” Rahim wrote.
(By Jack Farchy)
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