Copper: Humanity’s first and most important future metal
Millions of feet of copper wiring will be required for strengthening the world’s power grids, and hundreds of thousands of tonnes more are needed to build wind and solar farms.
Copper inventories are down 52%, below 200,000 tonnes, the lowest level since October 2008.
Copper extended gains for a third day Tuesday, rising to the highest in almost 12 weeks on predictions of further stimulus from the government of China, the world’s biggest consumer of the red metal.
Futures for delivery in July climbed 0.4% to $3.179 a pound at 10:12 a.m. on the Comex in New York after touching $3.1925, the highest for a most-active contract since March 7. Prices are up nearly 5% so far this month, heading for a second straight monthly gain.
Prices had touched an 11-week high on Friday, after Chinese Premier Li Keqiang said the country’s economy remained under stress and that governments at all levels should fast-track development.
On the London Metal Exchange, copper for delivery in three months rose 0.1 percent to $6,935 a metric ton ($3.15 a pound).
China, which accounts for about 40% of the world’s copper demand, uses most of the metal it exports in its manufacturing and construction sectors. This partly explains why copper traders closely follow news from China, searching for clues about future demand of the red metal.
In the last two years, copper mines around the world have been ramping up production in response to better prices. The ramp-up led to a surplus in global inventory in 2013, which resulted in analysts expecting another surplus this year.
But recent data released by the LME suggest copper inventories might be much tighter than expected. They are down 52%, below 200,000 tonnes, the lowest level since October 2008.
While some analyst predict prices may continue to surge this year on fears over inventories shortage, most actors don’t think it will change too much from where it is now.
In fact the size of the forecast surplus —less than 500,000 tonnes at its peak in 2016— is minor, representing only about 2% of current global consumption. And it will be short lived. Towards the end of the decade, experts say the market will swing back into deficit, with the supply gap quickly widening.
