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Copper prices rose on Monday as optimism around a US stimulus raised hopes of higher demand for metals and a recovery in the world’s biggest economy.

The copper price rose as much as 1.3% to $3.6745 ($8,100 a tonne) on the Comex market on Monday, with March delivery contracts back within shouting distance of multi-year highs hit early in January.

The metal has rallied nearly 90% since the depth of the pandemic in March.

Stimulus support

Commodities including copper and gold are finding supportive sentiment from US Treasury Secretary Janet Yellen “talking quite aggressively” about the Biden administration’s stimulus plans.

A $1.9 trillion aid package could be passed by US lawmakers as soon as this month just as covid-19 vaccines are being rolled out globally.

Copper is often used as a gauge of global economic health.

Thinning inventories

The rise in copper prices is underpinned by thinning inventories that pointed to higher demand for the industrial metal.

“Inventories are still quite low on exchanges. That gives good indication that manufacturing demand for copper is present and that its not just a speculative story,” Nitesh Shah, an analyst at investment manager WisdomTree, told Reuters.

In China, the world’s top consumer, copper inventories normally accumulate in the run up to the Lunar New Year as businesses close for the week-long festivities.

But this year, Chinese inventories have dropped to near decade lows on robust demand from factories, which are maintaining high operating rates due to shortened shutdown periods and tighter travel restrictions for workers.

Meanwhile, effects of the coronavirus pandemic on copper supply continues to be felt. In what was supposed to be a year of supply growth, global mined output during the first 10 months of 2020 were 0.5% lower compared to 2019 levels, according to the International Copper Study Group (ICSG).

In Peru, the world’s second-biggest producer, copper output plunged 12.5% to 2.15 million tonnes in 2020, the country’s Energy and Mines Ministry said on Monday.

Copper miners gain

Despite copper prices hitting a slump in the second half of January, the world’s top copper producers have continued to rally this year after spectacular gains in 2020.

Shares of BHP, the largest publicly traded copper company, are up 6% year-to-date. Copper giants Glencore, Southern Copper and Freeport-McMoRan all recorded double-digit gains during that period.

(With files from Reuters)