Copper Edges Higher: Supply Redirection Crisis Fuels Five-Month Highs

Copper prices edged higher in early trading on Monday, with LME three-month copper rising 0.7% to $9,925 per metric ton as of 0352 GMT, building on last week’s momentum after reaching five-month highs.

The current spot price stands at $9,813.48, reflecting ongoing volatility as markets respond to shifting trade dynamics and supply constraints. Friday’s session closed with copper settling at $9,914.00 per metric ton.

This marked a slight pullback from Thursday’s five-month peak when prices briefly surpassed the psychological $10,000 barrier.

Trading volumes were extraordinary, reaching approximately seven times the average daily volume, highlighting heightened market sensitivity.

Overnight activity in Asian markets demonstrated moderate volatility before prices stabilized, with SHFE copper in China inching up 0.1% to 81,220 yuan ($11,189.02) per ton.

The dollar’s drift below its three-week high provided support for copper prices, as a weaker US currency makes dollar-denominated metals more attractive for buyers using other currencies.

Global Market Overview

London Metal Exchange (LME):

The cash-settlement price has maintained its upward trajectory from $9,759.00 on March 14 to $9,829.00 on March 21. LME warehouse inventories continue their concerning decline, dropping to 233,750 tons from 237,200 tons in just one day, signaling tightening physical supply.

COMEX (US):

The premium for US copper contracts has reached unprecedented levels, with the differential between COMEX and LME prices exceeding $1,200 per ton last week. This historic spread reflects traders’ urgent positioning ahead of potential trade restrictions, with US futures approaching record highs.

Shanghai Futures Exchange:

Chinese copper prices have moved in tandem with global markets, though concerns are emerging about reduced import volumes as shipments are redirected to the US market.

This redirection could potentially lead to a drop in Chinese port shipments for April and May by as much as one-third compared to last year.

Key Market Drivers

US Tariff Speculation:

The primary driver of current market dynamics remains the Trump administration’s Section 232 investigation into copper imports. With the next round of tariffs due on April 2, traders are cautiously awaiting clarity on potential measures.

ANZ Research notes: “Expectations are rising that President Trump’s broad retaliatory tariffs due to come into effect on April 2 will hurt global economic growth. We don’t expect global growth to lurch lower, but it is likely to be softer”.

Supply Redirection Crisis:

An estimated 500,000 tons of copper are currently heading to US ports, dramatically higher than the usual monthly imports of about 70,000 tons.

This mass redirection has created an unprecedented domestic premium of $1,400 per ton over global levels, prompting Kostas Bintas to remark: “In terms of margins per ton, I’ve never seen a better trading opportunity”.

Structural Supply Deficit:

Industry forecasts suggest global demand will exceed supply by approximately 320,000 tons in 2025. The situation is compounded by the virtual collapse of US copper scrap exports, which typically account for one-third of global copper production.

Nick Snowdon, head of metals research at Mercuria, has described this development as an “under-appreciated shock” to the market.

Chinese Economic Factors:

Chinese authorities’ recent plan to boost consumption by increasing incomes provided additional support to copper prices last week, though demand from China’s property sector remains subdued. Meanwhile, Chinese buyers have reduced imports of US origin copper scrap, influencing global trading patterns.

Technical Analysis

Copper continues to trade within a congestion band between $9,751 and $9,950, with the $10,000 level representing the next significant technical barrier.

The bullish Andrews pitchfork pattern established from late December 2024 to early February 2025 remains intact, indicating a positive technical structure despite recent consolidation.

The copper-gold ratio has seen a significant breakout as of March 20, typically signaling economic optimism. While copper trades near five-month highs, gold reached record levels of $3,057.21 per ounce last Thursday before easing slightly on dollar strength.

Investment Flows

Copper-focused ETFs have shown resilience amid broader outflows from commodity sectors. The Sprott Copper Miners ETF (COPP), which provides exposure to large-, mid-, and small-cap copper miners, posted modest inflows last week while Natural Resources Funds saw outflows of $150 million.

Institutional investors have increasingly taken net long positions in copper, reaching the highest levels since May 2024, reflecting growing confidence in the metal’s outlook despite economic uncertainty.

Market Outlook

Analyst sentiment remains predominantly bullish, with Citigroup expecting LME copper to hit $10,000 per tonne in the next three months amid tight global supplies. Morgan Stanley also anticipates further gains, particularly as market participants continue positioning themselves for potential US tariffs.

The unprecedented redirection of global copper flows from China to the US creates significant market disruptions that could exacerbate the global supply deficit, which Goldman Sachs already projected to reach 180,000 tons this year.

As copper continues to navigate these complex dynamics, market participants should be prepared for continued volatility and potential supply challenges through 2025, with prices likely to remain elevated as geopolitical tensions and supply constraints persist.

This article was produced by The Rio Times’ automated newsroom system. How we use AI · Report an error

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