Concerns about supply disruption, historically low global stockpiles and rocketing energy costs have lit a fire under base metals, trumping concerns over the longer term impact of the Ukraine invasion on global growth, rising interest rates in the developed world and a slowing economy in China.
Copper for delivery in May rose on the Comex market in New York, touching a high $4.9490 per pound ($10,910 per tonne). The bellwether metal is up 10% since the Russian invasion of Ukraine little over a week ago. Adding to metal supply fears are falling inventories in LME-registered warehouses. Copper stocks, at 69,825 tonnes, are the lowest since 2005.
Base metals rallied across the board with the LMEX Index, which tracks six major contracts, surging to a record high. Nickel briefly trade above $30,000 a tonne for the first time since 2008.
Russia isn’t a major copper player, producing about 3.5% of the world’s copper. Still, commodities extended their massive rally this week as the war fueled fears of supply crunches. Sanctions on Russian individuals and corporates have prompted many banks, shippers and other firms to stop working with Russian companies or goods.
“This Russia and Ukraine conflict has only fanned the flames of the already stretched base metals markets,” Reuters quoted ING analyst Wenyu Yao. “All energy prices are through the roof and that will add more risk to production in Europe which will provide the catalyst to a rally,” he added.
Chile, responsible for more than a quarter of global copper production, recorded its lowest January output since 2011, government figures showed. Chilean copper production is expected to recover to register a similar annual haul as last year, according to the president of the country’s mining society. The world’s biggest supplier saw output slide 7.5% from January 2021, with lower ore quality and water scarcity among the reasons.