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Copper prices have gained more than 13 percent this year as a short-term supply squeeze on the London Metal Exchange (LME) continues to drive volatility in the market, according to Access Bank Group.
The bank, in its market commentary, said the squeeze had pushed spot copper to a substantial premium over three-month futures, while the Tom/next spread widened to about US$75 per tonne.
The tightness has been linked to the movement of hundreds of thousands of tonnes of copper towards the United States ahead of potential tariffs, leaving inventories in other markets increasingly depleted.
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“The declining availability of metal was also increasing pressure on traders holding short positions as the August contract expiry approached,” the bank said.
The rally has been supported by expectations of stronger structural demand for copper from data centres, electrification and renewable energy projects.
The higher prices have also boosted earnings prospects for major diversified mining companies, adding to the sector’s positive outlook.
However, there are early indications that the supply squeeze could be easing.
Access Bank said LME inventories recorded their first net increase since June 17, suggesting that some of the immediate pressure on physical availability could be beginning to ease.
The broader demand outlook has also been tempered by weak economic activity data from China, the world’s largest consumer of many industrial metals.
“The direction of copper prices in the near term would depend largely on whether physical tightness persists after the current redistribution of stocks towards the United States subsides,” according to the bank.
For Zambia, the price rally remains significant given the country’s dependence on copper exports for foreign exchange earnings and government revenue.
Sustained higher copper prices could strengthen export receipts and support investment in the mining sector, although the longer-term benefit will also depend on production growth and Zambia’s ability to capture more value from its copper resources.
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