The LME three-months copper price was trading at $9,973/mt ($4.52/lb) as of 1130 GMT Jan. 13, compared with the Jan. 12 close of $10,064/mt.

Base metals prices were again on the front foot Jan. 12, as extended buying pressure saw copper move above the $10,000/mt mark as investors turned to commodities with inflationary pressures increasing, analysts with UK brokerage Sucden Financial said in a report Jan. 13.

The increase in the red metal was attributable to several reasons, starting with favorable sentiment on the financial markets following the statements made on Jan. 12 by US Federal Reserve Chairman Jerome Powell, Commerzbank analyst Daniel Briesemann wrote in a research note Jan. 13.

Briesemann said copper prices were also influenced by anticipation of a production cut from Canadian mining group Teck Resources. The company had received a strike notice from United Steelworkers Local 7619, which represents 1,048 workers at its ' Highland Valley Copper operations in the Canadian province of British Columbia. Highland Valley's 2021 copper production was estimated on the company website at 128,000-133,000 mt, with decreased output in the first half of 2021.

A further consideration was the likely future demand for electric vehicles and the consequent high demand for the metal in the longer term, in other words, that the copper market "could potentially not be sufficiently supplied," Briesemann said.

“All this raised expectations, which were confirmed by strong Chinese electric car sales published yesterday [Jan. 12] morning,” the Commerzbank analyst said.

New energy vehicle

Output and sales of new energy vehicles in China amounted to 3.55 million and 3.52 million units, respectively, in 2021, marking an increase of 159.5% and 157.5% from 2020, according to the China Association of Automobile Manufacturers, or CAAM, on Jan. 12.

NEV sales made up 13.4% of China's total vehicle sales in 2021, which reflected China's NEV industry has entered the market-driven era rather than the policy-driven one, according to CAAM.

NEV sales reached a record low of 531,000 units in December, an increase of 114% from a year earlier and up 11.1% from November, CAAM data showed.

Sales of electric vehicles in the developed markets of the EU and the US have been recently eclipsed by Chinese sales. For instance, total EV sales increasingly dire from the EU and the US combined were 293,614 units in November, according to the latest data from S&P Global Platts Analytics.

Inventories

At the same time, copper exchange inventories are still on a downward trend.

Shanghai stocks were low at 29,000 mt, close to their decadal low of 27,000 mt in December, while LME stocks are down 66% from August highs to 80,300 mt, UK brokerage SP Angel said Jan. 13.

Supply fears were again abating, as several wage contracts were renegotiated in 2021, said Sudakshina Unnikrishnan, base metals analyst at Standard Chartered Bank.

“We expect copper mine output to increase in 2022, and more so in 2023, as a slew of project expansions and new mines come online, resulting in a larger concentrate surplus,” Unnikrishnan said.

Copper prices were likely to remain well supported in the near-term, Berenberg analysts said in a note.

“But current tightness to reflect temporarily tangled supply chains … we would see oversupply becoming more visible by year-end and monetary policy less accommodative,” Berenberg said.