Copper price maintains surge on supply shortage fears and US election influence

Copper prices have continued their recent rally due to supply shortage predictions and early reactions to the US elections.

Copper’s value increased for a third consecutive day amid expectations that China will unveil more support measures, with analysts suggest prices could rally further once the full US election results are known.

Prices climbed as much as 0.9% after China’s monthly services activity expanded at the fastest pace since July, following better-than-expected indicators from official and private factory gauges last week.

Supply to tighten

Copper’s value was also boosted by indications that supply of the base metal may tighten.

An analyst with leading international investment bank UBS has told a gathering that it expects the copper price to average around $16,000 (US$10,500) per tonne next year.

Sharon Ding, head of China Basic Materials at UBS, suggested that increasingly tighter copper supplies in the coming six to 12 months could lead to a deficit of more than 200,000t next year, pushing demand and prices up.

“We are still optimistic about copper prices in the coming two years … although prices may face some downside pressure in the short term from the perspective of position holding,” Ms Ding told reporters.

“Demand from new energy vehicles, solar, wind and China’s grid investment remains resilient and copper is also benefiting from high-growth industries such as data centres for artificial intelligence (AI) and defence needs.”

Consumption to improve

Analysts are forecasting that with improving financial conditions and an easing monetary cycle, copper consumption in Europe and the US is likely to improve.

Elsewhere, Trading Economics has reported that copper futures rose to around US$4.45 per pound in November, the highest in nearly a month, amid a pullback in the dollar and greater confidence in stimulus by the Chinese government.

It also noted the impact of the US elections on prices and suggested that policymakers in China’s top legislative body are set to transfer off-balance-sheet debt from local governments into the central budget to finance aggressive stimulus previously pledged by the Chinese Communist Party, thereby supporting manufacturing.

Trading Economics said this fiscal stimulus would add to the extensive monetary support measures by the country’s central bank in the previous month, likely contributing to the slight rebound in manufacturing activity unveiled in October.