Copper touches 11-week high on China recovery

LONDON: Copper prices climbed to their highest in 2-1/2 months on Tuesday as more signs emerged that the economy in China, the world's biggest metals consumer, is extending its recovery from the coronavirus outbreak.

Sales of vehicles, a key demand driver for metals, in China are estimated to have risen 11.7pc on the year in May, while the Chinese city of Wuhan found no new cases of COVID-19.

Strong physical demand for copper in China, plus tight scrap supplies, are encouraging bearish speculators to close out positions and supporting its rebound in recent weeks, said analyst Nicholas Snowdon at Deutsche Bank in London.

"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 0.8pc at $5,525 a tonne by 1420 GMT, the highest since March 13.

Copper, widely used in construction, transport and power sectors, has gained 26pc on the LME since hitting a 45-month low of $4,371 on March 19.

The most-traded July copper contract on the Shanghai Futures Exchange (ShFE) hit its highest since March 6 at 44,800 yuan.

CHINESE STOCKS: Bonded warehouse stocks in China rose by 2,000 tonnes to 212,000 tonnes last week, according to Shanghai Metals Market, the first rise in nine weeks.

More gains in stocks are expected as copper output resumes in Peru following coronavirus-linked 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."

PRICES: LME aluminium edged up 0.1pc to $1,538 a tonne, zinc climbed 1pc to $2,041.50 and lead advanced 1.7pc to $1,707.50 after touching a seven-week peak of $1,710.

Nickel gained 1.3pc to $12,790 while tin added 1.6pc to $15,940, the highest since March 13.