Causes of the Most Recent Rise in Copper Prices

The price of copper reaches a record high of almost $11,000 per ton.

The long-term consequences of the closing of the Cobre Panama mine are a concern for traders.

The copper boom is driven by speculation and demand in China.

This week, the price of copper hit a record high, surpassing the $11,000-per-ton threshold for the first time. With financial speculators spearheading a notable increase in copper futures, this spike comes after forecasts of a supply shortage. Due to its use as a gauge of the state of the world economy, the metal—which is necessary for goods like EV batteries and power lines—has emerged as one of the best-performing commodities.

Are there other factors contributing to the current increase in copper prices, or is this rally an indication of increased confidence and investment and manufacturing?

Experts in the copper market think the rise is a reflection of both speculation and actual market movements. The consequences of closing the Cobre Panama mine in South America are causing traders to worry.

Due to environmental concerns, the mine that began producing copper in 2019 was forced to close. Concerns regarding supplies are being exacerbated by the rise in demand for copper from China, the world’s largest user. However, these factors are not the source of the current sharp price increase. Two other things are to blame.

• US bond prices frequently fluctuate in tandem with copper prices. Copper prices have increased as a result of US bond yields being higher than anticipated.
• According to Morgan Stanley, some New York investors are experiencing financial strain as a result of having to repurchase their equities at a premium over what they originally sold them for.

 

Rise follows longer-term expansion.

Because copper is essential to energy transition technologies and infrastructure, a bull market in copper began in 2016 and lasted until March 2020. The cost per pound increased from $2 to $3. The price of copper is still rising due to increased demand for wind turbines and electric cars; unless there is a severe setback or a shock to the Chinese economy, no notable changes are expected.