Copper prices rose for a third day and zinc hit a seven-week peak as investors welcomed more easing of coronavirus lockdowns and a pause in China-US tensions.
Copper and zinc joined some stock markets in ticking higher as countries started phased reopenings of economies.
Also supporting commodities was the central bank in China, the world’s top metals consumer, setting the yuan at a broadly neutral midpoint, a move regarded by analysts as Beijing offering an olive branch to Washington amid renewed trade tensions.
“Some of the worries related to the flare-up in China/US tension caused a spike in the offshore renminbi over the weekend, so that’s brought some calm to the market,” said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.
Benchmark three-month copper on the London Metal Exchange (LME) was up 0.9 per cent to $US5,203.50 a tonne at 1600 GMT, its highest since April 30.
Copper, used as a gauge of global economic health, has gained 19 per cent on the LME since March 19, when the contract hit a 45-month low.
Hansen cautioned, however, that copper would struggle at last week’s high just under $US5,300.
“Commodities are supply and demand driven so with these headwinds the upside remains limited. As we’re facing global recession and billions of unemployed, economic activity is just not going to be strong enough to support a substantial recovery from these levels.”
Wednesday marked China’s first trading day following a break for Labour Day holidays between May 1-5.
The net speculative short position for LME zinc had declined to 31 per cent of open interest by Monday’s close from a multi-year high of 44 per cent on March 27, according to Marex Spectron estimates.
LME zinc climbed 3.1 per cent to $US1,976.50, the highest since March 16.
“Meanwhile ShFE (Shanghai Futures Exchange) zinc aggregate open interest has jumped from 232,000 lots to 242,000, highs not seen since early March, suggestive of some length being established onshore (China),” Alastair Munro at broker Marex said in a note.
The discount of LME cash copper to the three month contract had risen to $US30.50 a tonne by Tuesday’s close, the biggest since January 23 and compared to a discount of $US3 in late March, indicating healthy supply of metal in LME warehouses. It was last quoted at $US28 on Wednesday.
Aluminium slipped 0.3 per cent to $US1,480 a tonne, while nickel advanced 2.5 per cent to $US12,300, lead dropped 0.1 per cent to $US1,630 and tin edged down 0.03 per cent to $US15,195.