Copper claws to three-week peak as investors balance Iran with Chinese demand

LONDON: Copper prices hit their highest in more than three weeks on Friday as investors weighed signs of improved demand in top metals consumer China against uncertainty over a fragile ceasefire in the Iran war.

Benchmark three-month copper on the London Metal Exchange gained 1.7percent to USD12,901 a metric ton by 1415 GMT, its highest since March 17. It was set to end the week up about 4percent.

US Comex copper futures climbed 2.8percent to their highest in a month at USD5.92 a lb. Copper extended gains after a Federal Reserve official said a rate cut was not out of the question if oil prices come down. LME copper has gained 10percent since March 23, when it sank to the lowest in over three months, on hopes for ending the war in the Middle East, which may damage the global economy and metals demand.

“I don’t think there’s any appetite to try to go long where there’s risk of deterioration ahead of those negotiations in Islamabad,” said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen. Investors were wary as a fragile two-week ceasefire between the US and Iran showed further strain on Friday, a day before they are to negotiate in Pakistan.

The market was supported by signs of improved demand in China, where copper inventories in warehouses monitored by the Shanghai Futures Exchange fell 11.5percent this week, having slid 37percent since March 9.

The Yangshan copper premium, which reflects demand for copper imported into China, jumped to USD73 a ton, data showed on Friday, its strongest since June last year. “Even though there’s concern about Iran, the actual numbers on the ground in China point in the other direction, so the market is trying to navigate between those two elements,” Hansen said.

Copper prices shrugged off a further increase in LME inventories to their highest since December 2013.

LME aluminium rose 1.5percent to USD3,496 a ton, as the continued closure of the Strait of Hormuz highlighted supply issues in the Gulf, which accounts for about 8 percent of global production.

LME zinc was flat at USD3,327 a ton and lead slipped 0.2percent to USD1,923.50, while nickel gained 0.7percent to USD17,215 and tin rose 0.7 percent to USD48,040.