Aluminum is surging and iron ore jumped to a fresh high as commodities advance toward the highs of the last supercycle. Metals are benefiting as the world’s largest economies announce programs to build back greener from the coronavirus shock.

The U.S. recovery is accelerating and President Joe Biden’s $2.25 trillion infrastructure plan will highlight sectors like electric cars, driving further gains in commodities critical to the green-energy transition. That’s coming alongside a continued economic boom in China, where a push to reduce emissions is filtering through to supply cuts for some metals just as demand is picking up.

“The super part of the copper supercycle is happening right now,” Max Layton, managing director for commodities research at Citigroup Global Markets, said by phone. “The bullish outlook is decarbonization-led, and I’m totally onboard with that for the next three to four years, but the super part of this cycle is actually more related to the scale of global stimulus.”

Copper—a bellwether for the global economy—rose as much as 2.1% to $9,750 a ton in London, the highest since 2011. The metal has gained 25% on the London Metal Exchange this year. Iron ore in Singapore jumped to the highest since contracts launched in 2013, while Chinese steel futures reached fresh highs.

Supply squeeze

Copper’s integral role in everything from electrical wiring to motors is fanning expectations for further gains as nations roll out more aggressive climate targets. Goldman Sachs Group Inc. and trader Trafigura Group expect the metal to top 2011’s record of $10,190 and surpass $15,000 in the coming decade as demand outstrips supply.

“Copper could hardly peak and pull back with this backdrop,” said Harry Jiang, head of trading and research with Yonggang Resources Co. Tightness in markets outside China may lead to a supply squeeze, which will offset current weakness in Chinese demand, he said.

Still, risks to the industrial rally are building in the short term. A rise in coronavirus cases and new variants threaten to derail reopening plans in some regions such as India, while investors are concerned about a possible pullback in Chinese stimulus. Prices could become overly extended for industrial uses, according to Xiao Fu, head of commodities strategy at BOCI Global Commodities.

“I’m not in the $15,000 copper camp. There will be some automatic stabilizers before we approach those kinds of levels, and there will be some demand adjustment,” Xiao said by phone from London. “And let’s not forget: the pandemic is not over, and cases are still surging in many parts of the world.”

There’s also a focus on the possibility of more intervention by Chinese authorities, who say they’ll stabilize raw material prices and have already implemented a swathe of production curbs across industries. Inner Mongolia has said it will stop approving new aluminum projects as part of the country’s green push, and speculation about curbs in Xinjiang is giving further support to prices at a three-year high.

Steel’s stormed higher on a pledge by China to reduce output, though the measures have so far sparked an increase in production as mills churn out supply ahead of possibly more extensive restrictions. At the same time, rebar inventories are declining, signaling robust demand.

And supply woes can’t be ruled out. Port workers in Chile, which accounts for about a quarter of the world’s copper supply, called a strike for Monday in response to President Sebastian Pinera’s move to block a bill allowing people to make a third round of early withdrawals from their pension funds.

The threat of COVID-19 in nations in South America could hamper the export of key industrial commodities like iron ore and copper, said Gavin Wendt, senior resource analyst at MineLife Pty.

European miners rose on Monday, led by those with large copper exposure such as Lundin Mining Corp. and Antofagasta Plc. Citigroup Inc. analysts including Ephrem Ravi recommended buying any dips, with expectations that copper’s rally could potentially play out through the summer.

Despite risks that the rally may falter in the short term, investors are signaling appetite for metals futures. Aggregate open interest in SHFE copper is at the highest in more than a year, and positions in aluminum have climbed. Elsewhere, hedge fund managers boosted bullish Comex copper bets in the week ended April 20.

—With assistance from Ranjeetha Pakiam, James Thornhill and Michael Msika.