LONDON: Copper prices hit three-month highs on Tuesday as growing optimism about demand in top consumer China because of the country’s stronger manufacturing data and a weaker dollar spurred buying, traders said.
Benchmark copper on the London Metal Exchange (LME) traded 0.7% higher at $9,945 a metric ton in official rings from an earlier $9,984, the highest since March 27.
China’s factory activity expanded in June, supported by an increase in new orders that lifted production, after contracting the previous month, a private sector survey showed.
A lower US currency makes dollar-priced metals cheaper for holders of other currencies, which could increase demand. This relationship is used by funds which trade using buy and sell signals generated by numerical models.
Low inventories were also helping. In LME registered warehouses copper stocks at 91,250 tons have dropped 66% since the middle of February.
In warehouses monitored by the Shanghai Futures Exchange (ShFE), copper inventories at 81,550 tons have also fallen 66% since early March.
“Overall availability remains tight across both exchanges, reinforcing strong underlying demand and fuelling backwardation,” analysts Benchmark Mineral Intelligence said in an note. Backwardation refers to the premium for nearby contracts over those with longer maturities.
The premium for the LME’s cash copper contracts over the three-month forward hit $319 a ton last week, its highest since October 22. It has since slipped to around $120 a ton on expectations of large copper deliveries. LME data shows 1,500 tons were delivered to its warehouses in the South Korean port of Gwangyang on Monday.
However, cancelled warrants or metal earmarked for delivery indicate another 31,975 tons are due to leave the LME system.
LME stocks have been depleted by the threat of tariffs on US copper imports by President Donald Trump which have pushed up prices on COMEX, creating a premium above LME prices.
In other metals, aluminium gained 0.3% to $2,604.5, zinc retreated 0.6% to $2,736.5, lead dipped 0.1% to $2,043, tin rose 0.6% to $33,925 and nickel slipped 0.4% to $15,160.
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