Copper and iron ore prices hit record highs yesterday as demand for the key commodities surges on the back of a powerful recovery in the global economy.
With major economies, led by the US and China, reopening after last year’s COVID-19 shutdowns, industries are ramping up production, pushing the cost of materials ever higher as traders also worry about a lack of supply caused by the pandemic.
Copper, a major indicator of the state of the global economy owing to its use in a multitude of products, yesterday finally broke to an all-time high above US$10,200 per tonne, and with the global recovery expected to continue for some time, analysts said the price could continue to rise.
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“It’s hard to foresee copper prices turning around amid the current bullish atmosphere,” said Ji Xianfei, at Guotai Junan Futures Co (國泰君安).
“The long-term prospects for metals prices are ‘too good’ and point to higher prices in the next few years,” Commerzbank AG analyst Daniel Briesemann said.
“The decarbonization trends in many countries — which include switching to electric vehicles and expanding wind and solar power — are likely to generate additional demand for metals,” he added.
Iron ore also broke to new levels above US$200 a tonne as commodities prices across the board advanced, with lumber, tin, bacon and sugar all sharply higher.
“The global economic recovery is lifting steel demand, with China’s steelmakers keeping elevated levels of output, despite production curbs aimed at reducing carbon emissions and reining in supply,” National Australia Bank’s Rodrigo Catril said.
However, that has fanned fears about a spike in inflation around the world that many said could force central banks to wind back their ultra-loose monetary policies that have helped fire a global markets rally for more than a year.
Top bankers led by the US Federal Reserve have repeatedly pledged to maintain their accommodative measures for the foreseeable future, though many believe their hand could be forced by a period of excessively high inflation.
There are risks to the rally, especially if the current strong period of manufacturing starts to ease.
In China, the top consumer, signs are emerging that high copper prices are starting to bite, and authorities have pledged to stabilize raw material prices.
China’s imports of copper ore and concentrate fell last month from the previous month, according to customs data released yesterday.
Some manufacturers and end-users have been slowing production or pushing back delivery times after costs surged, Shanghai Metals Market said last week, while weaker-than-expected domestic consumption has opened the arbitrage window for exports.
Real shortages of raw materials that power the economy are driving current gains in commodities as much as anticipation of future demand, and that makes it different from the last so-called supercycle, said Greg Sharenow, who manages a portfolio focused on energy and commodities at Pacific Investment Management Co.
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