Copper snapped a two-day loss and rallied by as much as 1% in London, tracking gains in Asian equities, particularly semiconductor firms. This rebound partially trimmed the losses incurred in the previous session due to the escalation of the Iran conflict. The industrial metal is benefiting from increased optimism about long-term demand, specifically from new data centers required for artificial intelligence, given copper's critical role in wiring and renewable energy infrastructure.
Despite the resumption of hostilities in Iran and the associated risks to energy supplies from the Strait of Hormuz, investors largely looked past these geopolitical tensions. The market is also being supported by fundamental drivers such as a drawdown in inventories in China and supply headwinds in South America, according to Al Munro, metals strategist at Marex Group. Munro noted that "fast money dominates our trading landscape," leading to sharp intraday swings, with China continuing to buy on dips.
Benchmark three-month copper on the London Metal Exchange (LME) was up by 1.62% to $13,379 per metric ton at 0700 GMT on Thursday, and later jumped by as much as 2.2%. In contrast, the Shanghai Futures Exchange's most traded copper contract rose by 0.16% to 103,160 yuan ($15,182.65) per ton. Other industrial metals also saw gains, with LME aluminum up by 0.62%, zinc growing by 1.85%, lead gaining by 0.61%, nickel by 1.21%, and tin climbing by 2.57%. Aluminum, in particular, was supported by declining inventories and concerns about supply disruptions in the Middle East. Craig Lang, CRU's principal analyst, stated that investors tend to "price in an expectation that any escalated tensions will be brief and a solution will be found."
Earlier in the week, copper prices had been choppy due to the geopolitical tensions, with an interim peace deal signed last month providing some respite. However, the market remains mindful of broader macroeconomic sentiment, including inflation and interest rates, which affect input costs like energy for manufacturers. There's also the pending decision from Washington regarding potential tariffs on refined copper, a risk that has yet to be fully discounted, especially given continuous outflows from LME warehouses to the US.
