Caixin
Feb 19, 2021 07:01 PM
BUSINESS & TECH

Copper Futures Near 10-Year High on Growing Optimism for China’s Economy

A worker processes a copper belt in February 2020 in Wenzhou, East China’s Zhejiang province. Photo: VCG
A worker processes a copper belt in February 2020 in Wenzhou, East China’s Zhejiang province. Photo: VCG

Benchmark copper futures in China, the world’s largest consumer of the metal, rose to their highest level in almost a decade on Friday, tracking gains in London prices, and on gathering confidence in a domestic recovery as industries like real estate and power generation equipment-makers returned to work after the Lunar New Year holiday.

The second workday after the end of the weeklong national holiday saw the most actively traded April copper contract on the Shanghai Futures Exchange climb 2.5% on Friday to 64,320 yuan ($9,915) per ton by the 3 p.m. close, the highest level since Sept. 20, 2011.

Optimism about China’s economic recovery is driving the rally that started Thursday, an industry insider told Caixin, declining to be named so they could speak candidly. And with the start of the global rollout of the Covid-19 vaccine, industrial activity in Europe and North America is also expected to recover, further pushing up copper prices, the insider added.

China accounted for over half of global consumption in 2019, with construction of power facilities taking up 37% of the volume, the real estate sector accounting for 21% and consumer appliances 15% of the total, according to a report by the state-run Xinhua Finance Agency last year.

Signs of recovery in the country’s copper demand emerged at the end of 2020. Investment in the power grid increased 6% in December, while production of solar power facilities jumped by over a quarter compared the same period in 2019 as power generators acted to achieve the goal of peak carbon emissions by 2030, according to data from International Copper Association Ltd.

The monthly China Copper Demand Index published by the association settled at 107.9 in December, up by 6.1 points from a month earlier and moved into the so-called “slightly overheated” zone. This range is anything higher than a reading of 104.2.

The rally in Chinese futures came after copper on the London Metal Exchange also rose to the highest in nine years, topping $8,600 on Thursday. A manager at Jiangxi Copper Company Ltd. attributed the rise to loose monetary policy, saying carbon neutrality targets set by countries around the world have boosted the green energy industry and driven up demand for copper.

The upward trend in China’s copper prices may continue, with a report by Huatai Securities Co. Ltd. estimating prices have entered a new upward cycle, with momentum driven by a shortage of electrolytic copper and a weak U.S. dollar.

Contact reporter Lu Yutong (yutonglu@caixin.com)

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