Industrial metals prices rose sharply on Wednesday after US and Chinese negotiators opened a new round of trade talks and Federal Reserve Chairman Jerome Powell bolstered expectations of a US interest rate cut later this month.
Copper, aluminium, zinc, nickel and lead each gained more than 1.5% on the London Metal Exchange (LME), with benchmark copper closing up 2% at $5,940 a tonne.
They are still well down from a year ago, however, when US President Donald Trump began a trade conflict with China which investors expect to weaken economic growth and metals demand.
Nickel ended 2.3% higher at $12,990 a tonne after touching $13,000, the highest since April 17.
But weak supply and demand fundamentals mean prices of the metal used in stainless steel will likely slip to $11,000 by the end of the year, said Capital Economics analyst Ross Strachan.
"Demand is pretty poor and auto sales are still pretty weak," he said.
Concerns about trade policy and a weak global economy "continue to weigh on the US economic outlook" and the Fed stands ready to "act as appropriate" to sustain a decade-long expansion, Powell said.
US equities touched record highs and the dollar weakened.
US and Chinese trade officials held a constructive phone conversation, White House economic adviser Larry Kudlow said, marking a new round of talks. Kudlow said the discussion went well.
The base metal markets are suffering from trade war fatigue, with LME volumes down 7% in the first half of 2019, writes Andy Home.
China's producer prices flatlined in June, fuelling concerns that a slowdown in manufacturing will further drag on growth in the world's largest metals consumer.
China's economic growth is expected to slow to a near 30-year low of 6.2% this year, a Reuters poll showed.
Inventories in LME-registered warehouses are the lowest since 2013 at 153,612 tonnes, though stocks in Shanghai Futures Exchange (ShFE) storehouses more than doubled in recent weeks to 21,811 tonnes.
There was a global deficit of 27,200 tonnes over January-April in the 2.4 million tonne a year nickel market, the International Nickel Study Group said.
Indonesia said this week it expected three nickel smelters to become operational in 2019, with annual processing capacity of 3.9 million tonnes of ore. Nyrstar said it was extending force majeure at its Port Pirie lead and zinc smelter in Australia. China issued a fresh batch of import quotas for newly restricted high-grade copper scrap and aluminium scrap.
Bosnia's sole aluminium smelter was shut down on Wednesday over a huge debt it had incurred.
LME aluminium finished up 1.7% at $1,850 a tonne, zinc rose 1.7% to $2,401 and lead gained 2.2% to $1,963. Tin bucked the trend to close down 0.1% at $18,200 a tonne.
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