Copper Sparks Huge Rally on Low Inventories, Strong Chinese Demand

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Copper futures are rallying to kick off the trading week after sliding more than 2% last week. The industrial metal is finding support on recent data highlighting a slump in inventories, as well as developments suggesting stronger demand from China. Copper prices are joining the broader rally in the metals market after declining to multi-week lows.

September copper futures picked up $0.072, or 2.58%, to $2.8645 per pound at 16:56 GMT on Monday on the New York Mercantile Exchange. The red metal has been on a tear over the last three months, advancing more than 20%. Copper recently entered positive territory in 2020, rising 2.3% year-to-date.

For the most part, the copper market has concentrated primarily on China, which accounts for about half of the planet’s copper consumption. Beijing is forecast to consume about 24 million tons in 2020 as factory activity expands at the fastest pace in about a decade in the post-coronavirus rebound. China has been importing a lot of copper, but the numbers suggest its stockpiles continue to decline.

Last month, Chinese imports of unwrought copper and copper products surged 16.1% to an all-time high of 762,211 tons. This is also up 81.5% from 420,000 tons the same time a year ago.

In global copper markets, inventories in warehouses monitored by the LME stand at 114,375 tons, down roughly 60% since the middle of May. Copper stocks in LME-registered warehouses are at their lowest levels since March 2019.

But some worries over rising US-China tensions could threaten economic growth in the world’s two largest economies. Although both sides reassured global financial markets that they are still on track to meet the provisions of the phase-one trade agreement, political animosity could impact commerce. This level of uncertainty comes at a time when the US still immersed in growing COVID-19 cases and is looking to be fully entrenched in the V-shaped recovery.

It is believed that if the US moves ahead with its next $1 trillion or $3 trillion fiscal stimulus plan, it would be a boon for copper.

In other metal commodities, December gold futures picked up $12.90, or 0.63%, to $2,040.91 per ounce. September silver futures surged $1.58, or 5.74%, to $29.12 per ounce. September platinum futures rallied $33.50, or 3.44%, to $1,003.80 an ounce. September palladium futures skyrocketed $86.20, or 3.96%, to $2,262.80 an ounce.

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