Copper’s run to record highs may not be over yet

Copper has had an impressive run so far this year and after a recent pullback from its record highs, tight supplies and rising demand for the industrial metal suggest prices may climb even higher.

For the month, prices for most-active copper futures HGU21, -1.39% HG00, -1.39% look to score a nearly 3% gain, their third in four months — erasing some of the 8.3% decline suffered in June.

“The announcements that the Chinese government would release strategic reserves in an effort to temper prices worked to some extent throughout June and was exacerbated by unwinding of speculative positions that had been built up over the past year,” said Matthew Fine, portfolio manager of the Third Avenue Value Strategy portfolios. He sees the recent rise in copper prices as a “simple reversal of the decline in June.”

China said in June that it planned to release national reserves of major metals, with a goal to stem the rally in commodity prices brought on by a global economic recovery. The news helped pull copper prices down from the record highs reached the month before. In early July, Beijing auctioned state stockpiles of copper, aluminum and zinc reserves to raise supplies, according to The Wall Street Journal.

With “speculative positioning now more normalized,” however, Fine said the “realization that Chinese reserve releases are not likely to be very large and are temporary in nature, the fundamentals of a tight physical market and a terrific demand outlook are being weighted more heavily.”

Copper prices trade around 28% higher year to date, which would mark the  largest yearly rise since 2017. After the September contract settled at Thursday at $4.52 a pound, it’s down 5% from the record settlement high of $4.762 a pound on May 11.

(by Myra Saefong on

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