Copper rallies as spotlight shifts back to stronger demand

LONDON: Copper prices recovered on Monday as the market turned its attention back to robust economic growth and demand in China and expectations of an upturn at manufacturing companies in Europe and the United States.

Benchmark copper on the London Metal Exchange (LME) was up 1.4% at $6,398 a tonne at 1600 GMT.

Prices of the metal used in the power and construction industries fell to a one-month low of $6,226 on Friday as funds took profits on long positions.

"Prices stalled at around $6,500, the fatigue of going nowhere set in and there was some profit-taking," said Citi analyst Oliver Nugent, adding that the short-term noise created by funds didn't change the backdrop of healthy demand.

"The medium term is positive, visible stocks are low and the narrative of a V-shaped recovery in China is still relevant. Its imports of refined metal are still strong."

DEMAND: China's industrial output is steadily returning to levels achieved before the pandemic paralysed much of the economy, with pent-up demand, government stimulus and surprisingly resilient exports propelling a recovery.

IMPORTS: Chinese imports of unwrought copper and copper products rose to a record 762,211 tonnes in July, a jump of 16.1% from the previous record of 656,483 tonnes in June and up 81.5% from 420,000 tonnes in July 2019.

INVENTORIES: Copper stocks in warehouses registered with the LME are at 114,375 tonnes, down nearly 60% since the middle of May and their lowest since March 2019.

Highlighting the tight LME market are cancelled warrants - metal earmarked for delivery and no longer available to buyers - at nearly 60% of total copper stocks and large holdings of copper warrants.

UNCERTAINTY: Weighing on sentiment overall was nervousness about a fresh flare in US-China tensions and considerable uncertainty on whether US policymakers could approve a mooted stimulus package.

OTHER METALS: Aluminium gained 0.7% to $1,784 a tonne, zinc was down 0.5% at $2,391, lead lost 0.7% to $1,902, tin was little changed at $17,765 and nickel ceded 0.7% to $14,280.