Copper price rebounds as global energy crisis keeps roiling the market

Power shortages are forcing output cuts from China to Europe

Most base metals rose, with copper trimming a weekly slump, as the sector continues to be roiled by the global energy crisis.

The energy crunch, fueled by record coal and gas costs, has forced metal output cuts from China to Europe, depleting inventories. Copper mining giant Freeport-McMoRan Inc. reported lower-than-expected third-quarter production from its sites in the Americas, adding to concerns over a tight market that’s fueled a historic squeeze and seen prices near record levels recently.
 

Yet the surge in prices is also raising concerns about the sustainability of the the global recovery, putting pressure on manufacturing margins and supply. Policy makers are facing growing pressure to react to a spike in inflation they’ve said is transitory.
 

After hitting a record high on Oct. 15, the London Metal Exchange’s index of metals prices has retreated this week, driven by mounting demand concerns and worries around China Evergrande Group. While the indebted real-estate developer’s cash crisis has created a threat to the Chinese economy, market sentiment improved Friday as Evergrande staved off default.
 

Copper rose 0.5% to $9,878 a ton by 10:45 a.m. on the London Metal Exchange, though is still down 3.9% this week. Zinc and nickel gained about 0.7%, while aluminum edged lower. The metal fell by the daily limit in Shanghai as coal futures extended a retreat after Chinese authorities continued to take action to tackle the energy crisis.
 

Meanwhile, supply remains under pressure, especially in China. The country’s Jiangxi province started power rationing to industrial sectors including steel, aluminum and copper, according to researcher Mysteel. The southern province, a major producer of refined copper and copper products, is the latest to battle a power shortage that could worsen in winter heating season.

Chinese provinces have been rushing to meet annual energy intensity reduction goals by shutting plants. More than 30% of capacity in the steel, aluminum and cement industry must meet the government’s most stringent standards for emissions and energy efficiency by 2025, according to longer-term guidelines released on Thursday night.
 

In the ferrous market, iron ore advanced 1.5% to $118.20 a ton in Singapore, after falling 4.1% on Thursday. The material surged 6% in Dalian, recouping most of Thursday’s losses, while rebar futures slipped further in Shanghai.