(Bloomberg) – Copper prices rose above $9,000 a ton, an 11-month high, as investors reacted to the risk that global supply issues could push the market back into the red.
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The metal, considered a bellwether for the global economy, held crisis meetings on how Chinese smelters would deal with plummeting processing fees following unexpected disruptions to the supply of mined ore. As a result, prices have soared this week. Investors are increasingly concerned with the idea that the worst of the global recession is behind us, especially for metals such as copper that are increasingly used in electric vehicles and renewable energy.
Analysts at Macquarie, led by Marcus Garvey, said they expected another market deficit for both concentrates and refined metals this year, and that smelter demand was expected to rise “following another year of disappointing mine supply.” Production is decreasing, it said in an email. The bank expects prices to peak at $9,500 per tonne in the third quarter.
The unexpected tightening of the global copper market is mainly caused by the closure of a giant mine in Panama last year, but it has also raised concerns about output in Zambia, which is facing a power crisis caused by the El Niño phenomenon.
Analysts at Macquarie said global refined copper production could rise 2.1% this year, but lower than previously expected due to concentrate shortages. However, it added that production cuts by Chinese smelters may be limited.
The fund is also making a bullish bet on copper as global mining supplies tighten and demand in China gradually recovers, said Everbright Futures analyst Zhan Dapen.
Copper prices rose 2% to $9,066.50 per tonne on the London Metal Exchange and were trading at $9,025.50 per tonne at 7:58 a.m. local time. It rose 5.5% this week.
–With assistance from Atul Prakash.
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