Copper price surge not backed by supply and demand fundamentals

Copper’s recent price surge isn’t backed by supply and demand fundamentals, according to Trafigura Group, a top copper trader known for its bullish market outlook.

Trafigura’s Chief Economist, Saad Rahim, stated, “Prices of non-ferrous metals have moved much higher than fundamentals in the physical spot market might indicate or justify, especially for copper.”

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Copper prices hit a record $11,104.50 per ton last month but have since dropped 10%, trading at $10,025 on the London Metal Exchange. Despite high copper futures, the market in major consumer China shows signs of weakness.

Trafigura, typically optimistic about copper, has acknowledged recent market underperformance, attributing it to a strong dollar. Rahim attributed the recent price surge to “investment flows” but predicts market tightening due to supply constraints. Issues like the closure of First Quantum Minerals Ltd.’s Panama mine have led to a shortage of semi-processed copper ore, forcing smelters to cut production and indicating tighter inventories of refined metal despite weak demand.