Copper Staging Another Rally. USB: “This is Just the Beginning”

Copper futures rebounded from an 11-month high on Wednesday, March 20, pressured by worries about demand from top metal consumer China and a stronger USD ahead of tonight's Federal Reserve policy meeting.

London Metal Exchange benchmark 3-month copper (HG1:COM) last traded -0.8% at $8,902/ton, with prices unexpectedly rising to $9,025.50 on Monday, the highest level since April last year. Last week, Chinese copper smelters agreed to cut production.

Reacting to that news, UBS analysts wrote that the copper price rally so far this year is “just the beginning” as they still see a structural undersupply of copper and predict growing shortages in the copper concentrate market.

Recent UBS research flashnote added: “Extended large-scale maintenance at Chinese smelters — with capacity of up to 3 million tonnes — in the second quarter of 2024 has triggered higher metal prices as processing production is not tied to long-term contracts, leading to tighter copper supplies.”