In a recent analysis, Citi analysts highlight that copper is currently experiencing its second major bull market of the century, with prices approaching a 15-month peak. This surge is attributed to a combination of factors, including disruptions in key mining operations and an optimistic shift in the Federal Reserve's monetary policy expected later this year, which may bolster the global economic outlook.
However, China faces ongoing challenges with its real estate sector and weakening consumer confidence. The nation's copper smelters, responsible for over half of the global refined copper production, are contemplating reductions in their output as processing fees plummet.
Citi analysts point out that the primary driver behind this bull market is the escalating demand for copper, fueled by initiatives aimed at decarbonization. They argue that only an increase in copper prices can address the current supply deficits.
Reflecting on the copper bull market of the 2000s, where prices saw a more than fivefold increase within three years due to China's urbanization and industrialization, Citi advises corporate consumers to hedge against copper, anticipating a potential significant rise in prices over the next few years.
Despite a brief dip in prices in the London morning trade, copper prices rebounded, as evidenced by a notable increase in London Metal Exchange (LME) inventories, marking the largest rise since September. As of mid-morning in London, copper was trading up at $9,449.00 a ton, closely following a high of $9,484.50 a ton recorded on Monday, the highest since January 2023.
Other essential metals also experienced a rise, with zinc prices increasing by 1.4% amid potential output risks in China due to a significant drop in treatment charges at smelters.
