Copper prices rally to 11-mth highs on this key Chinese signal

Investing.com-- Copper prices rallied over 3% to their highest levels in nearly 11 months, supported chiefly by signs of tighter supplies after Chinese smelters were seen discussing joint production cuts.

U.S. copper futures expiring in May surged 3.3% on Wednesday to a 11-month peak of $4.0690 a pound, clearing key psychological levels in the process. Benchmark three-month copper futures on the London Metals Exchange hit a nine-month high of $8,927.0 a metric ton. 

Copper prices supported by Chinese smelter cuts 

Gains in the red metal were spurred chiefly by media reports showing China’s biggest copper smelters met to discuss potential production cuts, amid recent weakness in refined copper prices. 

The move also came amid tightening supply conditions for mined copper, following continued production disruptions in Peru and Chile, the world’s biggest copper producing countries. Both countries saw their copper exports dented by civil unrest over the past year. 

“Mine supply setbacks are trickling down to refined copper production, pushing prices higher. China’s major smelters discussed to curtail production capacity… raising concerns for refined copper supply. A recent sharp decline in treatment charges led to a discussion around output curbs,” ANZ analysts wrote in a note. 

But questions still persisted over whether the copper melt-up would last, given that weakening economic conditions in China are also expected to dent the country’s appetite for refined copper.

Chinese copper inventories have steadily increased over the past year, raising questions over slowing import demand in the country. A prolonged slowdown in China's real estate sector, which is a key driver of copper demand, was also a key weight on copper prices over the past year. 

Mining stocks surge on copper spike

Major global mining stocks were also buoyed by the spike in copper prices. In Australia, Rio Tinto Ltd (ASX:RIO) and BHP Group Ltd (ASX:BHP), two of the world’s miners, surged more than 2% each.

Overnight, U.S.-listed Freeport-McMoran (NYSE:FCX) surged 7.6%, while UK shares of Swiss commodity trader Glencore PLC (LON:GLEN) jumped nearly 5%.