Copper and aluminium prices climbed to their highest in more than two months overnight as more signs emerged that the Chinese economy is extending its recovery from the coronavirus outbreak.
Tight scrap supplies and strong physical demand for copper in China, the world’s biggest metals consumer, are encouraging bearish speculators to close out positions and support its rebound in recent weeks, said Deutsche Bank analyst Nicholas Snowdon.
“You can understand the price path so far, reflecting a forced liquidation of shorts in the market, but I think that’s broadly complete now,” he said.
“The key question for further upside is whether Chinese physical demand can remain as strong going into mid-year as it has been in the past three months. Realistically, there are seasonal headwinds that are likely to moderate the strength of that demand, at least in the near term.”
Three-month copper on the London Metal Exchange (LME) was up 0.6 per cent at $US5,519 a tonne by 1600 GMT, its highest since March 13.
Copper, widely used in the construction, transport and power sectors, has gained 26 per cent on the LME since hitting a 45-month low of $US4,371 on March 19.
LME aluminium climbed 1.1 per cent to $US1,554.50 a tonne, its strongest since March 25.
Bonded warehouse copper stocks in China rose by 2,000 tonnes to 212,000 tonnes last week, according to Shanghai Metals Market, representing the first rise in nine weeks.
More gains are expected as copper output resumes in Peru after coronavirus-related closures, Commerzbank said in a note.
“Supply in China is therefore likely to increase in view of the greater availability of concentrate and copper scrap, plus rising imports,” it said.
LME zinc slipped 0.2 per cent to $US2,019 a tonne and lead advanced 2.5 per cent to a seven-week peak of $US1,722.
Nickel gained 1.7 per cent to $US12,840 while tin added 2 per cent to $US16,000, its highest since March 13.