Benchmark copper has climbed more than 25% so far this year, touching the highest in more than a decade, as speculators piled into the market on the back of waves of metal-intensive support to help China recover from COVID-19.

Chinese officials have warned that they will cap high commodity prices to dampen inflation.

“We expect some pullback in emergency liquidity and market stimulus (in China),” said John Meyer, head of research at SP Angel.

“We do not see this interrupting physical demand for base metals but we do see this dampening any irrational exuberance in futures markets.”

The cash copper contract on the London Metal Exchange (LME) is expected to average $8,800 a tonne in the third quarter, a median forecast of 25 analysts showed, down 11% from Wednesday’s closing price.

That forecast is still up 17% from the January poll.

Copper is supported by concern about potential mine disruptions, including from Peru’s socialist presidential front-runner, who has proposed nationalising mining in the world’s second biggest copper producer.

The consensus forecast for the copper market balance flipped to a deficit of 177,000 tonnes this year from a surplus of 31,000 tonnes.

ALUMINIUM EMISSIONS?

Aluminium prices have also seen healthy gains, rising by more than a fifth so far this year to three-year peaks, partly on worries about China clamping down on output to reduce emissions.

“The narrative of China limiting aluminium production to meet energy targets is intriguing but thus far it is not backed by evidence,” said analyst Carsten Menke at Julius Baer.

Chinese output jumped by 8% year-on-year in March.

Cash LME aluminium is expected to average $2,188 a tonne in the third quarter, down 8.6% from the current price.

The market surplus forecast has been marked down by about a third to 770,000 tonnes compared to the January poll.

NICKEL SURPLUS

Nickel has underperformed other LME industrial metals so far this year on concern about rising supply from Indonesia.

But independent consultant Robin Bhar believes nickel’s underperformance is not justified.

“As many questions as answers remain over the ability of Tsingshan to convert NPI (nickel pig iron) to nickel matte and then into battery-grade material at a required quantity and at a competitive price.”

LME cash nickel is seen averaging $16,800 a tonne in the third quarter, down 3.5% from Wednesday’s close.

Analysts have slashed their nickel market surplus forecast for 2021 by half since the last poll to 31,000 tonnes.