(Adds ICSG and comment) Copper prices soared to two-year highs...

(Adds ICSG and comment)

Copper prices soared to two-year highs on Monday, driven by supply concerns highlighted by BHP Group's (BHP) bid for Anglo American AAL.L , though signs of sluggish demand in top consumer China kept prices short of a record peak.

Benchmark copper CMCU3 on the London Metal Exchange (LME) had advanced 2% to $10,162 a metric ton by 1628 GMT from an earlier peak of $10,165 a ton, close to the record high of $10,845 hit in March 2022.

Traders said sentiment was boosted by Chinese property developer CIFI Holdings 0884.HK agreeing a restructuring plan with bondholders. The slowdown in China's property and construction sectors have weighed on base metals markets.

A BHP (BHP) and Anglo American AAL.L tie-up would create an entity that controls 10% of global copper supplies, surpassing Chile's Codelco and Freeport-McMoRan FCX.N .

"It (the bid) shows how valuable copper is going to be for miners. People are thinking demand is going to grow fast," one copper trader said. "But unless Chinese demand shows strong recovery there will be a pullback."

Copper has been boosted by markets anticipating tight supplies and growing demand from energy transition applications such as electric vehicles as well as new technology such as artificial intelligence and automation.

Weak Chinese demand can be seen in copper stocks in warehouses monitored by the Shanghai Futures Exchange, which are close to four-year highs after rising above 287,000 tons from around 33,000 tons at the start of this year CU-STX-SGH .

The Yangshan premium assessed by SMM SMM-CUYP-CN has dropped to zero for the first time on record, indicating weak appetite to import copper into China.

"The surge in copper prices remains puzzling to us as copper’s fundamentals remain lackluster," said Marex consultant Edward Meir.

Elsewhere, the International Copper Study Group said the global copper market

faces a surplus

of 162,000 this year.

The market is awaiting the outcome of this week's U.S. central bank meeting, with forecasters expecting interest rates to be kept on hold.

A softer dollar was supporting industrial metals overall, traders said.

Aluminium CMAL3 rose 0.8% to $2,590 a ton, zinc CMZN3 gained 3.7% at $2,950, lead CMPB3 climbed 1% to $2,230, tin CMSN3 was up 0.6% at $32,600 and nickel CMNI3 advanced 0.5% to $19,200.