Copper prices reached their highest in eight months on Tuesday as better-then-expected trade data in China, the world's largest metals consumer, pointed to a modest recovery in demand and the yuan strengthened.
Benchmark copper on the London Metal Exchange (LME) ended up 0.2% at $6,302 a tonne after touching $6,314.50, the highest level since May 1. It has risen 1.7% this week.
Macroeconomic factors including the stronger yuan, solid Chinese trade figures and the signing of a US-China Phase 1 trade deal this week were boosting prices, said Deutsche Bank analyst Nick Snowdon.
But a soft physical market heading into Lunar New Year celebrations later this month "should limit the near term upside", he added.
He said the market should tighten again in the second quarter as demand picks up, boosting prices to around $6,500.
China's exports rose for the first time in five months in December and by more than expected, signalling some recovery in demand.
Unwrought copper imports rose 9.1% in December from the previous month to their highest since March 2016.
"We expect a mild recovery in domestic (China copper) demand from a low base of 2019," said Yu Xiaojiang, an analyst at Anglo American. "Housing completions and infrastructure investment could climb up and stimulate consumption of copper wires and rods."
Global refined copper production edged higher in December, according to an index based on satellite surveillance of copper plants.
The signing of a US-China Phase 1 trade deal on Wednesday will de-escalate but not end a dispute that has weakened economic growth and metals prices.
As part of the deal, China has pledged to buy almost $80 billion of additional manufactured goods, over $50 billion more in energy supplies about $35 billion more in services from the United States over the next two years, according to a source.
Credit Suisse analysts said the deal would have minimal implications for global metals demand.
China's currency continued to strengthen against the dollar after the US Treasury Department reversed its decision to designate China a currency manipulator. A stronger yuan makes metals prices in the dollar cheaper for Chinese buyers.
US consumer prices rose slightly less than expected in December and monthly underlying inflation pressures retreated, which could allow the Federal Reserve to keep interest rates unchanged through this year.
LME nickel finished down 1.8% at $13,840 a tonne as headline inventories in LME-registered warehouses rose to 177,600 tonnes, the highest since April. The discount for cash metal against the three-month contract, at $87, suggested ample nearby supply.
The stainless steel ingredient has fallen nearly 40% from a high in September.
Benchmark aluminium closed up 0.6% at $1,809, zinc fell 0.2% to $2,373.50, lead rose 1.6% to $1,947 and tin gained 0.3% to $17,430.
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