Bulk Copper Prices Soar During Chile Port Strike

In Chile, a group of port workers this week began protests against the government’s pandemic relief policies, threatening near-term supplies and contributing to higher commodity prices.

(Bloomberg) Copper’s stunning rally toward all-time highs above $10,000 is accelerating, with bulls swarming in to profit as stimulus measures, vaccine rollouts and climate pledges fuel a global recovery from the pandemic.

Copper on Tuesday extended gains to the highest in a decade as global growth underpinned a rally in metals markets ranging from aluminum to iron ore. Palladium climbed toward $3,000 an ounce. Commodities are advancing toward the highs of the last supercycle, when prices spiked in the early 2000s with a jump in Chinese orders.

With copper demand set to soar once more, there are mounting concerns that producers will struggle to plug the gap as they battle a host of technical and regulatory pressures. In top producer Chile, a group of port workers this week began protests against the government’s pandemic relief policies, threatening near-term supplies. In the longer term, producers worry that plans to boost mining royalties could stifle investment and make the country less competitive.

“While demand may have done as much as it can for the shorter-term cycle, supply bottlenecks both in raw materials and in freight continue to support,” BMO Capital Markets analysts including Colin Hamilton said in an emailed note. “Meanwhile, positive medium-term global growth dynamics continue to boost financial market interest in commodities as a whole.”

Metals led by copper, a barometer of the global economy, are benefiting as the world’s largest economies announce stimulus programs and climate pledges as they rebuild from the coronavirus shock. Investor appetite is increasing, with aggregate open interest in SHFE copper at the highest in more than a year.

“Marcoeconomic data continues to point to strong demand conditions for copper,” Vivek Dhar, an analyst with Commonwealth Bank of Australia, wrote in a note, citing industrial output and manufacturing indexes across the globe.

Copper rose as much as 2.2% to $9,965 a ton on London Metal Exchange, the highest level since March 2011, before trading at $9,907 as of 10:27 a.m. in London. Prices hit an all-time high of $10,190 in February 2011. Other metals were broadly higher, with aluminum in London at a three-year high.

Federal Reserve Focus

Despite all the bullishness, near-term copper demand from China may weaken. The top user may ship more of the metal overseas amid weaker-than-expected domestic demand, with the so-called arbitrage window for exports opening up for traders for the first time since September, according to Shanghai Metals Market.

In other markets, gold was little changed ahead of a two-day Federal Reserve policy meeting. The central bank has primed investors for no major changes in the bank’s language on inflation and rate expectations.

U.S. gross domestic product data released Thursday will show how the economic recovery fared in the first quarter, potentially impacting investor demand for havens. Economists surveyed by Bloomberg predict an annualized 6.8% expansion, after a moderate 4.3% rate in the first quarter.

Gold declined 0.1% to $1779.66 an ounce, after gaining 0.2% on Monday. It advanced the two previous weeks. Silver was little changed, while platinum declined.

Palladium Prices Also Surge

Palladium continued to rise after surpassing its record last week amid bets on surging demand from automakers and supply issues at top miner MMC Norilsk Nickel PJSC. HSBC Holdings said the metal could rise past $3,100 an ounce due to a widening deficit, before dropping to $2,740 by the end of the year.

“High prices will likely encourage the mobilization of largely unquantifiable above ground stocks,” analyst James Steel wrote in a note, while substitution of cheaper platinum in autocatalysts should start to clip demand.