Copper prices soared on Tuesday to their biggest daily percentage gain in 2½ years, as Glencore PLC’s decision to shut mines and an increase in Chinese imports prompted investors and analysts to ratchet back estimates for global supplies.
The rally forced many investors to scramble to close out bearish bets, which amplified the move, traders said. In recent weeks, bets on falling copper prices have outstripped wagers on rising prices due to the darkening outlook for growth in China, the world’s largest copper consumer and importer.
The Monday announcement by Glencore PLC, a Switzerland-based commodity trader and miner, surprised market watchers who were expecting the world would remain mired in a glut of the metal—used in everything from iPhones to refrigerators—for the foreseeable future. Glencore said it would shut two large copper mines in Africa that analysts say account for 1% to 2% of world-wide copper output.
While these cuts to supply aren’t likely going to be big enough to send copper futures on a sustained rally, Tuesday’s sharp reversal shows how vulnerable the copper market has become to shifts in sentiment.
The benchmark U.S. copper price jumped 5.3% to a seven-week high of $2.4340 a pound on the Comex division of the New York Mercantile Exchange, the biggest one-day percentage gain since May 2013. U.S. markets were closed on Monday for the Labor Day holiday.
The London Metal Exchange copper price rose 4.4% to $5,354 a metric ton after gaining 0.6% on Monday.
Copper, along with many other metals, has tumbled in recent months on the combination of a slowing Chinese economy and rising production from miners who had expanded operations during the commodities boom of the 2000s. Just two weeks ago, copper hit a fresh six-year low amid worries about growing surpluses this year and next.
“If Glencore delivers on everything they said, we’re in a balanced market situation and you are likely going to see higher prices,” said Bart Melek, senior commodities strategist with TD Securities. “The market has been caught off guard by how sensitive supply has become to price,” Mr. Melek said, adding that the U.S. price could reach $2.60 in coming weeks if there are further supply cuts, or if demand improves.
Jessica Fung, metals strategist with BMO Capital Markets, said Glencore’s supply cut would substantially reduce the 545,000-metric-ton surplus she forecast for the copper market next year. “The general view is that this is taking everyone’s supply numbers down,” Ms. Fung said.
Tuesday’s sharp turnaround in copper prices is the latest example of investors getting upended on popular commodities bets during a volatile time across financial markets. Money managers as a group have been shorting, or betting against, copper for the past 13 weeks, according to the latest data from the U.S. Commodity Futures Trading Commission. That made the market ripe for a swift reversal, analysts and traders said.
A similar turnabout in the crude-oil market lifted prices 27% over three days in August after lower U.S. production estimates and expectations of supply cuts from oil-producing nations fueled a buying spree. Oil prices have since pared some of those gains but haven’t hit new lows.
“The Glencore news was enough to spark some interest in copper,” said Bob Haberkorn, a senior commodities broker with RJO Futures in Chicago. “Copper has been extremely bearish over the last few months, so you’re seeing people getting out.”
Copper prices also got a boost from data released Tuesday showing China imported 350,000 metric tons of copper in August, up 4% from the year-ago period, according to analysts at Commerzbank. Still, for the first eight months of the year, China’s copper imports have declined by 8%, according to Commerzbank.