en.Wedoany.com Reported - Copper prices extended gains on Tuesday, approaching a record high. London Metal Exchange copper rose 2% on the day, briefly touching $14,000 per tonne before paring gains. This marks the first time the level has been breached since copper hit a peak of $14,500 per tonne in January this year. The catalyst for this rally stems from a rebound in Chinese demand and global supply concerns.

The red metal, seen as a barometer of the global economy, has gained momentum recently. Demand in China, the largest consumer, is showing signs of recovery, with data indicating a continuous decline in Chinese copper inventories, suggesting demand is picking up. Meanwhile, Chinese state-owned trading firms have issued healthy demand forecasts for the next decade.

Satellite data from Earth-i showed a significant drop in copper smelting activity last month. However, considering seasonal trends, this is not surprising, as the second quarter is typically used for maintenance and repairs, followed by increased orders in the third quarter.

Supply risks are also intensifying. The ongoing war in the Gulf region has led to tight sulfur supplies from the Middle East, which is expected to impact global copper production. Sprott estimates that about one-fifth of global copper mining requires sulfuric acid as a production input. Additionally, fuel supply concerns in Peru, a major copper mining hub, have also driven copper prices higher. These factors have offset concerns stemming from the economic impact of the Iran war.

Analysts point out that the clean energy transition is a major source of future copper demand, and its importance will surpass traditional end-use applications. Sprott stated that the growth rate of data center infrastructure and the energy transition will significantly outpace the projected growth of core economic uses. The firm forecasts that by 2040, copper demand from these strategic sectors will account for 45% of total demand, up from 32% in 2024.

As of now, copper prices have recovered from a 10% drop in the first month of the Iran conflict. Year-to-date, the red metal has accumulated a gain of 9.3%.

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