LONDON: Copper prices rose on Tuesday after top consumer China unveiled economic stimulus measures including tax cuts for manufacturing industry, bolstering the demand outlook.
US Secretary of State Mike Pompeo, meanwhile, said the United States and China were "on the cusp" of a deal to end a trade dispute that has pushed metals prices sharply lower since last summer.
Benchmark copper on the London Metal Exchange (LME) did not trade in official rings but was bid up 1.2 percent at $6,487 a tonne, reversing Monday's losses and approaching a seven-month high of $6,540 reached on Feb. 25.
The Chinese stimulus measures, which included promises of infrastructure spending, were largely expected and come as overall economic growth is cooling, with Beijing saying it targets growth of 6-6.5 percent this year, down from 6.6 percent in 2018.
For copper to really rally, China will have to move from talk to delivery on its stimulus pledges, said ING analyst Warren Patterson, predicting that copper would average $6,400 a tonne for April-June and rise later in the year.
TIGHT LME: Supporting copper are signs of tight supply on the LME, where headline warehouse stocks, at 118,600 tonnes, are the lowest since May 2008 and the premium of cash copper over the three-month contract has risen to four-year highs at $71.50. <MCU0-3>
PLENTIFUL CHINA: However, stockpiles in Shanghai Futures Exchange (ShFE) warehouses <CU-STX-SGH> have more than doubled to 227,049 tonnes during a seasonal lull in manufacturing activity during the Chinese winter and the Lunar New Year holidays. Chinese import premiums have fallen to $55.50 from $120 in September.
"On the LME it's all looking pretty constructive," said ING's Patterson, "but it's quite a different picture in China, where premiums are falling and ShFE inventories have swelled. Those indicators suggest a little bit of a concern over demand."
COLUMN: Copper is tight but not as tight as LME stocks suggest: Andy Home.
NICKEL: LME nickel was bid up 2.2 percent at $13,540 a tonne in official rings after hitting $13,620, the highest since August.
STOCKS: Nickel stocks in LME-registered warehouses, at 196,410, have nearly halved since the start of January last year. <MNISTX-TOTAL>
DEFICIT: Data from the International Nickel Study Group shows the nickel market deficit was 46,000 tonnes in 2016, 115,000 tonnes in 2017 and 127,000 tonnes last year.
OTHER METALS: LME aluminium traded up 0.8 percent at $1,891 a tonne, zinc traded 0.4 percent higher at $2,763, lead traded down 0.1 percent at $2,112 and tin was bid unchanged at $21,450.
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