(Bloomberg) – Prices for the world’s two most important mining commodities are rapidly drifting apart, with copper rising above $9,000 a tonne as supply cuts roil markets, adding to demand headwinds. and iron ore prices will fall.
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Copper soared 5% this week, ending months of inertia as investors focused on supply risks to mines and smelters. Traders are also tentatively optimistic that the worst of the global recession is behind us, especially for metals such as copper, which are increasingly used in electric vehicles and renewable energy.
However, signs of headwinds in traditional industrial sectors are still evident in the iron ore market, with futures prices falling below $100 per tonne for the first time in seven months on Friday. Investors expect China's long-running real estate crisis to continue into 2024, putting a lid on demand.
Steelmaking raw materials have fallen more than 30% since early January as hopes for a meaningful revival in construction activity faded. Loss-making steel mills are cutting back on ore purchases, and ore stockpiles are building up at Chinese ports.
At the recent National People's Congress in Beijing, policymakers set an ambitious goal of 5% economic growth, but announced few new policies to boost infrastructure and other construction-intensive sectors. As a result, sentiment has worsened. The decline will encourage those who believe that last year's rise in iron ore prices may have been a false dawn, with the effects of President Xi Jinping's real estate crackdown still far to be felt.
For copper, headwinds in traditional industrial areas are expected to be offset by increased use of electric vehicles and renewable energy.
While industrial conditions in Europe and the US still look weak, there is optimism about utilization in India, where increased investment has driven punk growth to more than 8%, making it the fastest growing major economy. There are more and more views.
For now, the main factor fueling the rise in copper prices is the unexpected tightening of global mining supplies. This is mainly due to the closure of a huge mine in Panama last year, but there are also growing concerns about production in Zambia, which is facing a power crisis caused by the El Niño phenomenon.
Bulk prices soared on Wednesday after Chinese smelters held crisis meetings on how to deal with plummeting processing fees following supply disruptions to mined ore. The group stopped short of making concerted production cuts, but pledged to realign maintenance work, reduce operations and delay the start-up of new projects.
Copper rose as much as 2% to $9,066.50 per tonne on the London Metal Exchange on Friday, trading at $9,018.50 per tonne as of 8:56 a.m. local time. Most metals were higher on the exchanges.
Singapore iron ore futures fell 3.6% to $99.55 a tonne, after earlier falling as much as 4.5%.
–With assistance from Atul Prakash.
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