Copper prices have surged to their highest in two years, with the London Metal Exchange (LME) reporting values reaching $10,215 per ton, before slightly retreating to $10,115.
This increase reflects a robust 15% rise in April, driven by positive Chinese factory data and a tightening of copper concentrate supplies.
Cooper is the main reason behind BHP's offer to buy rival mining titan Anglo American and the Aussie group might have timed its move to perfection one market commentator suggests.
Broker SP Angel says a significant factor in the supply constraints is the reduction in treatment and refining charges (TC/RC), which have plummeted to record lows, signalling potential production cuts from Chinese smelters, responsible for over half of the global refined copper output.
Disruptions at major mining sites, such as Cobre Panama's indefinite shutdown and issues at operations like Anglo American and MMG, have further strained concentrate availability.
Despite these supply-side challenges, demand for copper remains strong, influenced by optimistic developments in China's property sector and expectations of easing home purchase restrictions in major cities.
This sentiment is somewhat tempered by thin margins reported by fabricators, a key downstream demand source for copper, and stagnant import demand reflected in the weak Yangshan premiums.
Environmental factors also complicate the supply landscape. A report by PWC highlighted that 54% of copper production is vulnerable to climate change-induced droughts, with significant impacts already seen in major copper-producing regions like Chile and Zambia, where water shortages have affected processing plants and hydroelectric power availability.
On the demand side, new applications for copper are emerging. The expansion of data centres and the growth of the gig economy are expected to significantly increase copper usage, with estimates suggesting that new data centre construction could require substantial amounts of copper.
The electric vehicle (EV) sector also remains a significant growth driver, with EVs and associated charging infrastructure requiring significantly more copper than traditional vehicles.
Furthermore, geopolitical and economic policies, particularly in China, are stimulating the completion of apartment constructions and boosting consumer goods demand, which could further drive copper demand.
Speculative trading and substantial investor interest in copper as a long-term investment due to its crucial role in various high-growth industries are also fuelling demand though market dynamics such as contango levels in copper spreads indicate that immediate spot demand may not fully support the high prices.
But even if there are short-term dips below $10,000 per ton, the long-term outlook for copper prices remains bullish, says SP Angel, driven by strong demand in emerging sectors and constrained supply scenarios.