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Increasing Copper Prices Driven by Global Supply Challenges

(Bloomberg) — Copper prices have soared to over $9,000 a ton, reaching their highest level in almost a year. This surge comes as investors react to the mounting risk that global supply challenges could push the market back into a deficit.

The metal, often considered a barometer of the global economy, has experienced a significant increase in value this week. This spike follows a crisis meeting held by Chinese smelters to address a sharp decline in processing fees due to unexpected disruptions in the supply of mined ore. As confidence grows that the worst of the global economic downturn is behind us, particularly for metals like copper that are in high demand for electric vehicles and renewable energy, investors are increasingly bullish.

Analysts at Macquarie, led by Marcus Garvey, foresee a deficit in the market this year for both copper concentrates and refined metal. This is primarily due to a decrease in smelter output following a year of disappointing mine supply. The bank predicts prices could peak at $9,500 a ton in the third quarter.

The recent tightening in the global copper market can be attributed to the closure of a major mine in Panama last year. Additionally, concerns are growing about output in Zambia, which is grappling with a power crisis induced by El Ni├▒o.

While global refined copper output is expected to increase by 2.1% this year, it may fall short of previous estimates due to concentrate shortages, according to Macquarie analysts. Nevertheless, they believe that Chinese smelter cuts will be limited.

Investors are taking bullish positions on copper, anticipating further price increases as global mined supply tightens and Chinese demand rebounds, as noted by Zhan Dapeng, an analyst at Everbright Futures Co.

Copper prices jumped as much as 2% to $9,066.50 a ton on the London Metal Exchange and were trading at $9,025.50 a ton at 7:58 a.m. local time. This represents a 5.5% increase for the week.

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–With assistance from Atul Prakash.

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