By Onome Amuge
Copper topped $8 000 a tonne for the first time in more than seven years, with Goldman Sachs Group and BlackRock pointing to the start of a new long-term bull market as supply lags an expected demand boom.
On Friday, Copper price soared as high as 1.4 per cent to $8,028 a tonne on the London Metal Exchange, its highest since February 2013 on hopes that economic stimulus in the US will further boost demand for the red metal, already in short supply amid China’s construction boom.
The market is currently enjoying the sharpest rally in more than a decade. The price surge has been a boon for miners, with shares in copper-based producers including Antofagasta, Northern Chile and Freeport-McMoRan, Arizona climbing to multi-year highs. More so, production costs have been declining recently, setting the stage for a blowout year for profitability.
China’s remarkable success at containing the covid-19 pandemic and optimism about global economic growth in 2021 as vaccines are rolled out has fuelled a turnaround for copper which slumped more than 50 per cent from a record high in 2011, trading below $5,000 per tonne earlier this year when the covid-19 pandemic disrupted demand.
Frank Holmes, chief executive officer, U.S Global Investors, asserts that the copper rally is due in large part to improved manufacturing activity in the US, China and the Eurozone.
Sam Crittendonm, a RBC Capital Markets analyst, predicts another leg to the copper rally with momentum extending into the first half of 2021 buoyed by speculations that governments will do whatever is required to ensure the global economy gets back on track.
Citigroup, an American multinational investment bank, however warned investors to stay cautious as prices are likely to retrace if gains are not supported by the physical market.