Copper Powers On as Bulls Say Rally is One for the History Books
2020-12-01 10:40:00.403 GMT

By Bloomberg News
(Bloomberg) -- Copper extended a rally after capping the longest stretch of monthly advances in almost a decade, with prices headed for the highest close in seven years in London as China’s recovery continues and supply risks stack up.

Caixin’s China November manufacturing purchasing managers’ index rose to the highest in a decade, according to data released on Tuesday. That’s the latest indicator highlighting the economic strength in the top metals consumer, after Monday’s official PMI beat market expectations and showed the nation’s
economic rebound is gathering pace.

With prices up more than 75% from a low in March, this year’s rally is starting to resemble the spike in prices seen in the early 2000s as a surge in Chinese orders ushered in the start of the commodities supercycle, Luke Sadrian, chief investment officer at Commodities World Capital, said by phone
from London.

“This rally hasn’t even started yet,” Sadrian said. “The market’s looking like it did in ‘04 and ‘05, and the world didn’t get the memo.”

Aside from the bullish fundamental outlook, hedging trades in the options market could add fresh fuel to the rally as December contracts expire on Wednesday, Sadrian said. There are a large number of call contracts outstanding at $7,800 a ton, and if prices breach that level, the dealers who sold them may end up scrambling to buy futures to cover their exposure. 


Copper started the month with further gains after an eighth straight monthly advance, its longest rally since 2011. The metal has surged on a wave of bullish drivers including a weaker dollar, vaccine optimism, and a global move toward low-carbon power sources. Risks of supply disruptions in key mining countries also tightened the market, with analysts warning of “unmanageable” global deficits in the coming years.

Supply concerns were mounting on Tuesday after members of the Distrito union at the Centinela copper mine in Chile rejected owner Antofagasta Plc’s wage offer, drawing to a close regular collective bargaining and threatening a possible strike. Centinela produced 276,600 tons of copper last year, making it Antofagasta’s biggest mine after Los Pelambres.

“Low inventory, a deficit market, a strong support from macroeconomic drivers are expected to send copper to fresh highs in 2021,” Morgan Stanley analysts including Susan Bates wrote in a note dated Monday. They forecast copper prices will rise through next year to average $7,716 a ton in the fourth quarter.

London Metal Exchange copper rose as much as 1.4%, before trading at $7,659.50 a ton as of 10:37 a.m. in London. Copper on the Shanghai Futures Exchange fell 1.1% to 57,040 yuan a ton after the 14-day relative strength index topped 80. A level above 70 indicates to some investors that the contract is overbought.


All base metals moved higher, with aluminum adding 0.6% and nickel rising 0.3%.

To contact Bloomberg News staff for this story:
Phoebe Sedgman in Hong Kong at;
Winnie Zhu in Shanghai at;
Mark Burton in London at
To contact the editors responsible for this story:
Liezel Hill at
Dylan Griffiths, Nicholas Larkin


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