Chinese Demand opens “Arbitrage Window” for Copper pushing price to 1-month high
Copper prices rallied to 1 – month highs on the London Metal Exchange – LME as the commodity markets priced-in optimism over Chinese economic outlook. Solid demand in China opened the "arbitrage window" for copper imports, most traders said. Premiums for copper held in China's bonded zones have climbed by $9 this week to $74, the highest in more than two months.
"There is a lot of momentum investor interest (in copper)," Capital Economics analyst Caroline Bain said. "And (there is) some optimism about demand ... chiefly in China."
Many metals market participants are awaiting the outcome of China's Communist Party Congress next week, she said, for an indication of broader policy initiatives and their implications for metals demand.
World top copper producer Chile expects a moderate increase in the annual average price of the metal through the remainder of 2017, Mining Minister Aurora Williams said on Wednesday.
The price of copper has risen dramatically in recent months on strong demand from China, the top consumer of the metal. The sharp increase bodes well for the South American nation, where depending on prices copper-related activity can account for up to 15% of gross domestic product.
"The (spot) prices that we're seeing today are not necessarily sustainable in the medium term," Williams said.
Chile’s copper exports reached USD3.18-billion in September, their highest level in nearly three years, according to Chile's Central Bank. London Metal Exchange copper was up 1.4% at USD6, 893.50 a metric ton. Copper had spiked to a 3yr high of USD6, 970 per metric ton hit on Sept. 5.
Stocks of copper in LME warehouses fell by another 1,025 tonnes, exchange data showed last week on Thursday. They are now down 9% percent from mid-September's two-month peak.
Other drivers of copper price strength are a weak 2 week low dollar as U.S. central bankers showed they were taking a more guarded view of inflation. Federal Reserve policymakers had a prolonged debate about the prospects of a pickup in inflation and slowing the path of future interest rate rises if it did not, according to the minutes of the U.S. central bank's last policy meeting.
Copper Cathodes in transit