Copper prices surge on supply forecasts and market sentiment

Copper prices rebounded on Friday, driven by a weaker dollar and revised supply forecasts following mine disruptions. Three-month copper on the London Metal Exchange (LME) rose 1% to $9,867 per metric ton, recovering from a 1.3% decline in the previous session. Despite a recent peak of $10,208, LME copper was on track for its first weekly drop in five weeks.

The International Copper Study Group significantly reduced its global surplus estimate for this year from 467,000 tons to 162,000 tons, signaling potential supply deficits ahead. Nitesh Shah, a WisdomTree commodity strategist, highlighted the impact of supply disruptions and robust demand, particularly from China's investments in power grid infrastructure.

Market sentiment remains positive for copper and other metals, with expectations of a brief correction or consolidation before prices resume an upward trend. A softer dollar, coupled with Chinese markets being closed for the Labour Day holiday, contributed to lighter metal volumes and a weaker dollar index.

LME nickel climbed 1.4% to $18,900 per ton, disregarding a 15-month high in LME inventories. Other metals also saw gains, with LME aluminium up 0.6% at $2,542.50, zinc rising 1.1% to $2,917.50, lead increasing by 0.6% to $2,192, and tin jumping 2.5% to $31,750.

As Chinese markets reopen post-holiday, potential market activity could exacerbate declines if a risk-off sentiment persists. Despite recent inventory highs, the overall outlook for metals remains positive, driven by supply disruptions and strong demand, particularly from China.