Copper prices eased overnight as a survey showed factory activity in its top consumer – China – unexpectedly shrunk, but hopes for higher metals demand curbed price falls.
Lingering fears for a long recovery ahead for China pulled benchmark copper on the London Metal Exchange (LME) down 1.3 per cent to $US5,196 per tonne.
Prices touched their highest point in over six weeks in early trade, helped by a reading of China’s official factory activity showing faster expansion in April.
However, that was offset by the survey from Caixin which showed factory activity shrank last month as the coronavirus pandemic shattered global demand, sparking a substantial drop in export orders and more layoffs.
China accounts for nearly half of global copper consumption estimated at 24 million tonnes.
ING analyst Wenyu Yao said China’s recovery, although slow, had fuelled the recent rally in copper prices and that supply cuts were also underpinning the market.
Supporting prices were expectations for lower output as miner Glencore cut its production forecast for the year for copper by 3 per cent to 1.25 million tonnes and for zinc by 8 per cent to 1.16 million tonnes.
Mining giants including Anglo American and Rio Tinto have also cut their 2020 output expectations as government restrictions hobble operations.
Chile, the world’s top copper producer, boosted its output of the red metal in March versus the prior year, even as the coronavirus outbreak spread quickly across the country.
China Moly is sending more copper and cobalt from Democratic Republic of Congo (DRC) to ports in Tanzania, Namibia and Mozambique, as it weathers coronavirus disruption at South African outlets.
In further signs of higher demand in China, copper premiums in bonded warehouses of Yangshan rose to $US90 a tonne on Wednesday, their highest since November 2018, the latest Shanghai Metals Market (SMM) data showed.
Copper inventories continued to fall in China, with stocks in bonded warehouses of Shanghai down to 305,800 tonnes as of April 24, the lowest since February 7, SMM data showed.
Meanwhile, ShFE copper stocks declined for a sixth straight week, down 36.6 per cent to 230,956 tonnes.
Fresh cancellations of 10,000 tonnes took on-warrant aluminium stocks available to the market in LME warehouses to 1.18 million tonnes.
But the LME inventories are still near their highest since December, having climbed about 78 per cent since January 17.
LME aluminium eased 1.1 per cent to $US1,489.50 a tonne, zinc fell 0.6 per cent to $US1,933.50, lead shed 1.2 per cent to $US1,631, tin lost 1.1 per cent to $US15,135, and nickel shed 0.9 per cent to $US12,205.