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Copper Prices Reach Record Highs Amid Short Squeeze and Supply Tightening

Copper prices surged to unprecedented levels in Asian trading on Monday, continuing a recent upward trend driven by a combination of factors including a short squeeze on the Comex exchange and mounting bets on tighter market conditions.

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Three-month copper futures on the London Metal Exchange climbed 0.8% to hit a record high of $10,848.50 per ton, while one-month copper futures saw a 0.9% increase, reaching $5.1370 per pound and approaching record highs.

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The red metal has experienced a notable rally in recent weeks, fueled by increasing optimism surrounding expectations of lower interest rates and stimulus measures in China, the world’s largest importer of copper. Additionally, market sentiment has been buoyed by speculations of tighter supply conditions, attributed to refiner cuts in China and stricter sanctions on Russian metal exports.

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A significant catalyst behind the surge in copper prices was a short squeeze observed on the Comex Exchange last week. Intensive buying of long-term copper contracts drove prices higher and unsettled short positions on the metal. Particularly, U.S. copper futures witnessed a sharp increase during the squeeze, while traders rushed to secure copper supplies for delivery on the July contract.

Investors holding long positions on copper have been motivated by expectations of reduced mining output, which is anticipated to fall short of the rising demand for copper in the upcoming years. This trend is further fueled by global initiatives towards green energy and electrification.

Stimulus measures implemented by China, including significant relaxations in its property market restrictions and a substantial 1 trillion yuan ($138 billion) bond issuance last week, have further bolstered bullish sentiments in the copper market. China’s robust demand as the largest copper importer has contributed significantly to the optimistic outlook on copper prices.

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