Copper prices have been on fire in the past month. Copper, which had a hard time holding onto the $6,000 per metric ton price level, has topped $6,500. Based on the closing prices on August 25, copper has gained 22.2% in 2017. Copper miners including Glencore (GLNCY), Southern Copper (SCCO), and Freeport-McMoRan (FCX) have also followed copper higher.
Notably, the uptrend isn’t limited to copper. LME (London Metal Exchange) aluminum is also trading at the highest price level since 2014, while zinc prices are at a decade high. The underlying sentiments look bullish in the broader based metals space. Some fundamental factors are also driving base metal prices (RIO) (TRQ).
In aluminum, expectations of supply-side reforms in China are supporting prices. China accounts for more than half of the global aluminum production. Its overproduction has been flooding global markets for the last few years. Amid rising pollution levels and facing flak from its trading partners, China is curtailing its polluting aluminum capacity.
According to the most recent data, China’s July aluminum production was at the lowest since February 2017. If we exclude February, when production was lower due to the Chinese Lunar New Year holiday, July’s aluminum production is actually at a one-year low.
China’s announcement to ban imports of some copper scrap products provided fodder to bulls. You can read What’s Driving the Recent Strength in Copper Prices? to find out which other factors are driving the recent uptrend in copper prices.
Are copper’s recent gains sustainable? We’ll analyze this aspect in the next part.