Copper has surged to its highest-ever level, continuing a powerful rally driven by financial investors anticipating deepening supply shortages. On May 20, futures on the London Metal Exchange (LME) jumped more than 4%, pushing copper past US$11,000 a tonne for the first time.
Several developments in 2024 have bolstered confidence among copper investors, leading to increased speculative investment. Tight copper ore supplies have sparked discussions of output cuts by smelters, while a short squeeze on the New York futures market in May triggered a global rush to secure the metal.
“That has taken prices to another level and it’s very difficult to call a top in this environment,” said Craig Lang, principal analyst at CRU Group, speaking from Singapore. “Commodities markets do tend to overshoot.”
For years, investors, traders, and mining executives have warned of a critical shortfall in copper amid ballooning demand in green industries, such as electric vehicles and renewable energy infrastructure. Commodities veteran Jeff Currie recently described copper as the best long trade he had ever seen.
On May 20, LME copper was up 3% to US$10,992.50 a tonne by 12:04 PM Shanghai time. Prices have gained more than 25% since the start of 2024, leading gains for major industrial metals. Gold has also reached a record high, with both metals buoyed by optimism that the US Federal Reserve will cut interest rates in 2024.
A series of setbacks at major mines has heightened fears that a much-anticipated production shortfall will arrive sooner than expected. Smelter treatment fees, an indicator of ore market tightness, plunged to below zero in April. Additionally, a short squeeze on the Comex exchange in New York drove prices there to an unprecedented premium over the LME, prompting a rush to reroute metal supplies to the US and tightening supplies in other regions.
“The Comex short squeeze is rediverting copper to the US and tightening supplies in other regions,” said Jinrui Futures analyst Gong Ming. “The Chinese market is expected to see inventories withdrawal soon, with exports rising.”
However, some participants in the physical copper trade have cautioned that prices may be running ahead of reality. Demand remains relatively tepid, especially in top buyer China, where inventory levels are still high.
Despite these concerns, the outlook for copper remains strong, driven by the anticipated supply shortages and increasing demand from green industries. 
