LONDON: Copper prices climbed on Tuesday as easing lockdown restrictions in top metals consumer China stoked hopes for improving demand, while some bearish investors covered positions.
Shanghai set out plans on Monday for ending a painful COVID-19 lockdown that has lasted more than six weeks, heavily bruising China’s economy by disrupting supply chains and forcing factories to shut.
The commercial hub of 25 million on Tuesday achieved the long-awaited milestone of three consecutive days with no new COVID-19 cases outside quarantine zones.
“Shanghai is coming out of lockdown gradually and that is giving rise to demand hopes for cyclical commodities in particular,” said Commerzbank analyst Daniel Briesemann.
“From a technical point of view, most of these metals were oversold and sentiment was quite gloomy so it could only get better.”
Benchmark three-month copper on the London Metal Exchange (LME) was up 1.7% at $9,399 a tonne by 1115 GMT, after hitting its highest since May 6 at $9,418.
Copper, which is used in the power and construction sectors, fell to a five-month low last week as aggressive U.S. rate-hike bets and lockdowns in China led to slowdown concerns.
Recent price gains could also be chalked up to short covering, said Alastair Munro at brokerage Marex, adding that a rally in prices would be limited in a “market whose brittle confidence has been shaken to the core”.
Support: China’s state planner will strengthen support for manufacturers, the service sector and small firms, it said on Tuesday, as lockdowns rattled economic activity.
Growth: Analysts are sceptical about whether China will stage the kind of stunning recovery it achieved from the early depths of the pandemic two years ago, as its formidable export machine teeters and options to revive investment and consumption dwindle.
Dollar: The dollar slipped for a third straight day against its rivals, making greenback-denominated metals less expensive for buyers using other currencies.
Inventories: Copper stocks in LME-approved warehouses that are available to the market have declined 18% to 98,700 tonnes since this year’s peak on May 5.
Other metals: LME aluminium rose 0.8% to $2,855 a tonne, zinc added 3% to $3,670, lead rose 1% to $2,115, tin lost 0.2% to $33,805 while nickel shed 1.1% to $26,255.