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Copper’s rally slows at 9-1/2 year highs as equities struggle

(Updates prices)

LONDON, Feb 23 (Reuters) – Copper touched a new 9-1/2 year high on Tuesday but the pace of its gains slowed as equities markets fell and investors questioned whether strong demand and tight supplies were enough to extend a breathtaking rally.

With U.S. stocks down around 1% in their sixth consecutive day of losses, benchmark copper on the London Metal Exchange was 1.2% higher at $9,205 a tonne at 1700 GMT, having reached $9,305, the highest since August 2011.

Prices have shot up 17% in February, the biggest monthly rise since November 2016, taking gains since the start of 2020 to around 50%.

Many analysts expect demand from the power and construction industries to overwhelm supply, potentially pushing prices into record territory above $10,190 a tonne.

Copper may need to pause in the short term, but the outlook is bullish, said independent analyst Robin Bhar. “I would expect corrections to be pretty short-lived,” he said.

POWELL: Federal Reserve Chair Jerome Powell said interest rates would remain low and the Fed’s bond purchases will continue “at least at the current pace until we make substantial further progress towards our goals”.

DEFICIT: The roughly 24 million tonne a year refined copper market is already in deficit and was undersupplied by 589,000 tonnes in the first 11 months of 2020, the International Copper Study Group (ICSG) said.

POSITIONING: Speculators have piled into the market with net longs in LME copper at 54% of open contracts and in Shanghai Futures Exchange (ShFE) copper at 39% of open contracts by the end of last week, brokers Marex Spectron said.

Shanghai Dalu Futures, a brokerage, amassed a $1 billion long position in four days after the Chinese New Year celebrations ended last week, ShFE data shows.

CHINA: Yangshan copper import premiums rose to $75 a tonne, the highest since August, pointing to solid demand in top consumer China. <SMM-CUYP-CN>

STOCKS/SPREAD: Inventories in LME-registered warehouses are near their lowest since 2005 and traders are paying premiums for quickly deliverable metal. <MCUSTX-TOTAL> <CMCU0-3>

COPPER/NICKEL SUPPLY: Zambian copper output rose 10.8% last year to 882,061 tonnes and Philippine nickel output increased 3% to 333,962 tonnes, according to government data.

PRICES: LME aluminium was down 0.6% at $2,153 a tonne, zinc was 1.6% lower at $2,853, nickel fell 0.8% to $19,340, lead slipped 1.2% to $2,127 and tin was down 0.1% at $26,600.

All are at or near multi-year highs.

(Reporting by Peter Hobson with additional reporting by Mai Nguyen Editing by Mark Heinrich, David Evans and Jonathan Oatis)


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