Iron ore and copper surge to record highs on hopes of global recovery
Iron ore and copper prices have shot to record highs on expectations that global industry will get back into gear as the pandemic eases.
China's benchmark iron ore futures surged 10pc to a record high, steel prices rose 6pc and copper prices also jumped on hopes of improved demand as supply tightens.
“The commodities market continues to be on fire with a rally in iron ore and a jump in the price of copper,” said Russ Mould of AJ Bell.
“Commodities are being driven by stronger demand as the global economy recovers from the pandemic and supplies are getting tighter.”
Recovery hopes drove European stocks to new highs.
London-listed miners such as Rio Tinto, BHP Group and Glencore rose almost 3pc.
However, some of the price increases are speculative, rather than being powered by real demand, according to Alastair Munro of Marex’s London Metal Exchange desk.
“The major driver of the moves in the past fortnight has been fresh money inflows largely driven by inflationary pressures… financial inflows rather than actual physical demand,” he said.
But some metals consumers were having to “bite the bullet and pay these high prices, having held off for so long” Mr Munro said, which could flow through to higher product costs.
Iron ore prices hit $226 per ton on the Singapore futures market, leading Vivek Dhar, commodities analyst at Commonwealth Bank of Australia, to describe the sector as “very, very hot. Supply is not able to meet that strong demand”.
Last year China’s steel production reached 1.1bn tonnes. The country’s mills are trying to maintain that level before the introduction of expected controls on production intended to reduce pollution.
This has led to the country’s industry snapping up raw materials ahead of controls, further boosting prices.
Steel producers around the world have benefited from stronger demand, but higher materials costs could soon begin to bite.
Despite this, European steel industry body Eurofer expects demand for steel in the EU to rebound quickly, predicting an 11.7pc jump in consumption this year, offsetting the 11.1pc decline of 2020.
Copper, a long-time leading economic indicator, rose more than 2pc to a new high of $10,639 per ton on the London Metal Exchange.
The metal is essential to the shift to electrification and there are concerns the global mining industry is not ready to meet demand from the transition to battery-powered cars and renewable energy, which will require huge amounts of it for cabling and motors.
Goldman Sachs has forecast copper could hit $11,000 per ton this year and $14,000 by 2024, with the investment bank’s analysts warning that “massive green demand is set to clash with a completely unprepared supply side”.
