Copper extends gains to $4,20/lb on supply disruptions and China’s reopening

The industrial metal has been in an upward momentum in recent weeks, outpacing metal markets amid supply disruptions in Panama coupled with optimism over a potential recovery in major importer China despite the ongoing concerns over the global economic outlook and surging interest rates.

Supply disruptions in Latin America:

The red metal hit a monthly high of $4,20/lb on Tuesday morning following the supply disruptions in Panama. A deepening dispute between the Panama government and foreign copper miners also threatened to suspend the country’s copper exports, which could limit supply and push up prices.

Copper, Daily chart

On top of that, BHP's giant Escondida copper mine was hit by road blockades in Chile that disrupted mining supply deliveries in 2022.

Hence, the aggressive global interest rate hikes from last year, the record-high inflation and continued labour market tightness have slowed copper production across the developing world, especially in main producing countries such as Chile and Peru.

China’s reopening supports copper rally:

Copper prices have been getting bullish bets amid continued confidence over an economic recovery in China, as the world's second-largest economy and top copper consumer reopens and looks to revive its debt-laden property sector.

Optimism over a Chinese economic recovery surged on Monday after the People’s Bank held its benchmark mortgage rates at historical lows. While the move was largely expected, it signaled that the government intends to keep policy accommodative to shore up economic growth.

The industrial metal was under pressure during the second quarter of 2022 amid concerns over the global economic outlook, especially in top consumer China.

China's strict zero-COVID-19 policy curtailed economic activity and dented demand over the past year, driving copper prices down to $3,70/lb at the mid-July 2022, before rebounding to the current levels after the government reopened the economy at the end of last year.