Copper price rebounds, commodity demand signals “firing on all cylinders”

MINING.COM Staff Writer | May 20, 2021 | 11:00 am IntelligenceMarketsNewsChinaCopper

China April copper, zinc production up m/m; lead output down

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Copper rebounded from Wednesday’s slump, buoyed by expectations that demand will remain resilient in the face of possible tapering by the US Federal Reserve and China’s stepped-up efforts to jawbone prices lower.

Copper rose 0.4% to $10,038 a tonne Thursday morning on the London Metal Exchange, after climbing as much as 1.8%. Copper for delivery in July was up 0.3% on the Comex market in New York, with futures trading at $4.5550 per pound ($10,021 a tonne).

Sentiment improved with equities climbing and with a US report showing applications for state unemployment insurance fell last week to a fresh pandemic low.

A falling dollar also helped underpin gains in metals.

Click here for an interactive chart of copper prices

Copper prices fell almost 4% on Wednesday after China said it will strengthen its management of commodity supply and demand to curb any “unreasonable” increases in prices.

“For the time being, global commodity demand signals are still firing on all cylinders, with the recent weakening still consistent with noise,” TD Securities analysts led by Bart Melek said in a note. But “the context points to risks of normalizing growth.”

“When it comes to commodities, Chinese officials are between a rock and a hard place. A stabilization, or even a decline, in prices would require curbing demand,” said Frederic Neumann, co-head of Asian Economics Research at HSBC.

“On its own, expanding supply, either through increased production or the release of stockpiles, will likely have only a temporary impact in restraining price gains. The trouble with curbing demand, of course, is that it would harm economic growth.”

If supply remains inelastic, “you can’t suppress demand without hurting the economy,” ING senior commodity strategist Wenyu Yao said. “There’s no perfect solution.”

(With files from Reuters and Bloomberg)

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