Global copper prices have risen 30% since the start of the year, due mainly to construction demand from China and trading by speculators.
Three-month copper futures contracts were changing hands at the London Metal Exchange for more than $7,070 a ton as of late Tuesday Japan time. That number is the highest in three years and three months.
China has been importing more of the metal, according to customs statistics. September saw 430,000 tons enter the county, up 10% from August and the highest level since March.
"Chinese domestic construction and automotive demand is robust," said Yoshikazu Watanabe, president of Tsukushi Shigen Consul, a Japanese natural resources consulting firm. Watanabe's view is shared by many other analysts.
As part of a sweeping environmental initiative, Chinese authorities are restricting imports of scrap material, which often contains waste products. As a result, demand has grown for copper ingots.
The surging demand for copper is being reflected in the physical market. Copper inventories certified by the Shanghai Futures Exchange stood at about 104,000 tons on Friday, or about half the reading in mid-August.
Favorable economic indicators on the eve of the key Communist Party congress beginning Wednesday have also lifted copper prices. The producer price index rose 6.9% on the year in September, China's National Bureau of Statistics reported Monday, which exceeded market expectations.
"This is spurring a flow of funds to nonferrous metals, which closely track economic trends, amid high global equity prices," said Watanabe.
Copper prices started picking up in the spring until they hit the upper $6,000 range in the summer. However, many believed the upswing would last only until this week's party congress, driven by government efforts to stimulate the economy. Others saw copper demand waning, and prices dropped in September as a result.
But as the twice-a-decade congress drew closer, economic perceptions did not sour sharply. Market players deemed it safe to buy copper.
"The market saw the Chinese economy in a positive light, and the purchasing activity is strong," said Takayuki Honma, chief economist at Sumitomo Corp. Global Research. Copper prices "are unlikely to plunge after the party congress," Honma added.
Prices for the metal are also surging here in Japan. Shipping rates quoted by trading houses for copper ingots stood at 829,000 yen ($7,383) per ton. That marks a 23% increase in the year to date and the highest level since November 2014.
Because copper is used in a wide variety of industrial materials, such as electric wires, product prices could climb as well.
Nickel prices are also tracking the copper surge. International quotes have topped $11,700 a ton, or 15% higher since late-September.
Some observers predict that Chinese authorities looking to cut emissions will start ordering metal processors and construction material makers to scale back production as soon as November. The government is also seen as poised to actively shut down construction work.
"It's possible that demand for ingots will decrease," said Ri Setsuren, senior analyst at the Marubeni Research Institute. - Nikkei -