(Bloomberg) -- Copper extended gains toward $9,000 a ton, reaching its highest in 11 months, as investors bet on a drop in global supply.
The metal rose as much as 0.6% following a 3.1% surge on Wednesday after Chinese smelters met in Beijing to discuss steps including potential production cuts. The companies were responding to a tightening global concentrate market that's led to processing fees falling to near nothing.
Smelters in China, the world's largest refined metal producer and consumer, are at a critical juncture after so-called treatment and refining charges — the amount they are paid to convert concentrate into metal — collapsed to single figures. That's prompted discussion of possible production cuts at the plants, which are highly dependent on imported raw materials.
Read More: Chinese Copper Smelters Pledge Efforts to Combat Low Fees
“The rally has come earlier than the market has expected, and it may still have legs,” Li Xuezhi, head of the Chaos Ternary Research Institute, said in a note. Continued low processing fees “have led to boycotts from smelters,” Li said.
Copper is also benefiting from the possible end of the Federal Reserve's rate-hike cycle, with swap traders expecting the central bank to pivot to monetary easing as early as June. The metal's rally, which started in mid-February, brought a months-long spell of range-bound trading to an abrupt halt.
Copper rose on the London Metal Exchange to the highest since last April, before trading up 0.3% to $8,949.50 as of 9:59 a.m. Singapore time. Other metals were mainly higher, with aluminum edging up 0.2%.
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