Spot iron ore soared past $200 a ton for the first time, while copper rose above $10,000 as Chinese investors reignited fresh demand following a holiday.
The reopening of important industrial markets is sparking a surge across commodities markets from corn into lumber, together with tin climbing above $30,000 a ton for the first time since 2011 on Thursday. In the wake of mounting evidence of inflation — fueled by higher raw materials costs — investors are also increasingly concentrated on when the U.S. Federal Reserve might start throttling back its crisis support.
Many banks believe the rally has further to run, particularly for copper, which will benefit from increasing investment in new energy businesses. However, some analysts including Commerzbank AG’s Daniel Briesemann anticipate a short-term correction as compounds become detached from principles. There is also a risk that China could engage in policies that may slow demand for iron ore and copper.
“The long-term prospects for metals prices are ‘too good’ and point to higher prices in the next few years,” said Briesemann. “The decarbonization trends in many countries — which include switching to electric vehicles and expanding wind and solar power — are likely to generate additional demand for metals.”
Copper rose to the highest price in a decade this week, fueling bets it will rally farther to simply take out the record of $10,190 set in February 2011. Expect copper to continue churning higher.
Benchmark spot iron ore prices climbed to a new all-time high, while futures in Singapore and China rose. Steel demand is soaring as economies chart a route back to expansion as the world’s largest miners have been hampered by operational issues, tightening ore distribution.
The boom comes as China’s steelmakers keep output above 1 billion tons a year, despite a swath of production curbs aimed at reducing carbon emissions and reining in distribution. Instead, those measures have boosted steel prices and profitability at mills, letting them better adapt to higher iron ore expenses.
Spot iron ore with 62% content hit $201.15 per ton on Thursday, based on Mysteel. Futures in Singapore jumped up to 5.1 percent to $196.40 a ton, the highest since contracts were launched in 2013. In Dalian, prices closed up 8.8 percent.
The metals rally has boosted concerns about short-term Chinese need. Some producers and end-users have been slowing production or pushing back delivery times following costs surged. While weaker-than-expected domestic consumption has opened the arbitrage window for exports.
Tin rallied as much as 2% to $30,280 a ton on the LME, boosted by rising orders to the soldering alloy. Tin is at the highest since May 2011, using a 48 percent gain this year, which makes it the best performing metal on the LME.