Copper hits $10K amid supply risk warning
Copper briefly traded through US$10,000 a ton as investors raised bets on United States Federal Reserve rate cuts, and Goldman Sachs Groups Inc. warned of intensifying supply stress.
Metals joined a wider rally in risk assets after soft U.S. jobs data triggered renewed speculation that the Fed will move to lower rates this year. Copper initially rose as much as 2.1 per cent — returning to five digits again after a brief period in late April — before paring gains as trading got underway in Europe.
The prospect of Fed easing is adding to tailwinds for copper as bulls predict further gains with the world’s mines struggling to match growing demand. Goldman raised its year-end price target to US$12,000 a ton, from US$10,000 previously.
“We continue to forecast a shift into open-ended and mounting metal deficits from 2024 onwards,” the bank’s analysts, including Nicholas Snowdon, wrote in a note. There’s potential for a “stockout episode” — in which inventories run extremely low — by the fourth quarter, they said.
In the U.S., swaps markets now point to a 53 per cent chance of a Fed rate cut by year-end, up from about 40 per cent at the end of April. And in China, financial markets have returned from an early-may public holiday in a bullish mood on government pledges to boost growth.
SUPPLY STRESS
Copper is up 16 per cent in 2024 amid signs of recovery in global factory activity, as well as flashes of supply tightness — especially for raw materials shipped to smelters. Still, skeptics have pointed to soft indicators in China from falling import premiums to buyers holding off purchases.
The metal’s gains have been primarily driven by speculation, and may fade as high prices discourage consumption and spur aluminum substitution, Duan Shaopu, a director at China Nonferrous Metals Industry Association, said at a recent news conference, according to a script posted on the group’s Wechat account.
Copper was 0.6 per cent higher at US$9,967 a ton on the London Metal Exchange as of 11:02 a.m. local time, as all metals except nickel gained ground.