Copper prices have risen alongside oil, but analysts said the gains are unlikely to be sustained as poor demand prospects are likely to be reinforced by data showing further economic deterioration due to the coronavirus pandemic.
Benchmark copper on the London Metal Exchange traded up 0.6 per cent at $US5,164.5 a tonne at 1600 GMT.
Prices of the metal used by investors as a gauge of economic health touched a five-week high of $US5,248 a tonne on Monday, but that is still down about 17 per cent since the middle of January.
“What we’re seeing is a respite following the rise of the oil price, risk appetite is higher,” said Commerzbank analyst Daniel Briesemann, adding that the copper market would see a surplus this year.
“The worst has not yet been seen in the data, prices of industrial metals will come down in the short term. We don’t expect to see a recovery until the second half of the year.
Oil prices rose amid signs that producers are cutting production to weather a collapse in demand, but analysts warned the rise could be temporary as there is a shortage of storage around the world.
China is the world’s top consumer of base metals.
Its consumption is highly correlated with industrial output.
China’s economy contracted for the first time on record in the first quarter as the coronavirus shut down factories and shopping malls and put millions out of work.
However, analysts at National Australia Bank say the drop masks a partial recovery in industrial activity in March.
“According to industrial production data, output plunged by 25% per cent month-on-month in February on a seasonally adjusted basis,” they said in a note.
“However, as these restrictions started to be eased in March, industrial production rose by 32 per cent month-on-month, limiting the declines in first quarter GDP.”
Growth elsewhere has also stalled.
Economic activity in the euro zone all but ground to a halt this month as the coronavirus forced governments around the world to impose lockdowns and firms to down tools and shut their businesses, a survey showed.
Dwindling demand can be seen in copper inventories in LME registered warehouses, which at 263,425 tonnes have more than doubled since January and are near levels seen last October.
An oversupplied market can also be seen in the discount for the cash over the three-month copper contract, which rose to $US29.50 this week, matching the three-month high seen earlier in April.
It was last at $US22 a tonne.
Aluminium was flat at $US1,515 a tonne, zinc fell 1.1 per cent to $US1,874.5, lead slipped 1.1 per cent to $US1,649, tin gained 0.9 per cent to $US15,000 and nickel added 1.5 per cent to $US12,190.