Copper snaps back as AI worries fade, shortages persist in China

Copper prices rebounded on Wednesday after falling the previous day due to improved investor sentiment surrounding AI companies and ongoing shortages in China. The benchmark three-month copper on the London Metal Exchange surged 1% to $13,796 per metric ton by 10:25 GMT, after losing 1.6% on Tuesday and recording its biggest weekly drop since March.

The losses were primarily attributed to concerns that the Democrats' victory in the US midterm elections could result in stricter AI regulations, potentially dampening demand in the rapidly expanding copper market. "Stock markets are bouncing back, which is helping to support metals prices," stated Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.

Stocks rallied on Wednesday as investors turned their attention to a renewed surge of optimism in the AI sector following strong earnings from CoreWeave, an AI infrastructure company. "The market is allowing us to refocus on the fundamentals, and China's situation remains supportive," he added. Consequently, premiums for physical copper cathode in China surged, reaching a record $230 per ton, as domestic smelter output dwindled and seaborne metal deliveries remained limited.

Meanwhile, LME aluminium climbed 1.3% to $3,050 per ton, following a three-week low on Tuesday, which was driven by heightened Chinese exports and hopes for an end to the Middle East conflict, a crucial production region for the metal. The decline in aluminium prices impacted the Shanghai Futures Exchange, contributing to a 11-month low in aluminum prices.

Additionally, LME zinc increased by 1.1% to $3,753 per ton, lead rose marginally by 0.1% to $1,879, while nickel and tin also experienced gains of 0.9% and 0.6% respectively, reaching $16,170 and $46,595 per ton respectively.