Copper propelled to 4-week high by disrupted supply, demand hopes

• Benchmark copper on the London Metal Exchange traded up 2.6pc at $5,150 a tonne in official rings.
• Prices of the metal used by investors as gauge of economic health touched $5,200 earlier, the highest level since March 17.
• Expectations of large surpluses also pushed the discount for the cash over the three-month aluminium contract to $40 a tonne last week, the highest since June 2015.

LONDON: Copper prices hit a four-week high on Tuesday, boosted by coronavirus-linked supply disruptions and expectations of stronger demand, although gains were capped by caution over the pace of an economic recovery.

Benchmark copper on the London Metal Exchange traded up 2.6pc at $5,150 a tonne in official rings.

Prices of the metal used by investors as gauge of economic health touched $5,200 earlier, the highest level since March 17.

"Some people are convinced things are improving and are positioning accordingly, but a V-shaped recovery could turn out to be an illusion," said Peter Fertig, analyst at Quantitative Commodity Research.

"China is starting up, but we are far from normalisation, price gains could be getting ahead of economic reality."

DEMAND: China is the world's largest consumer of copper and other industrial metals. Markets were cheered last week by a survey of purchasing managers showing factory activity expanded in March after plunging in February.

But analysts say the survey does not quantify the strength of the bounce and that industrial production - highly correlated with metals demand - is unlikely to return soon to levels seen before the coronavirus outbreak.

"The recent recovery in industrial activity seems to have stalled, probably because of the collapse in external demand and high levels of vigilance inside China," analysts at Pictet Wealth Management said in a note.

POLL: That idea is reflected in a Reuters survey showing China's economy is expected to grow only 2.5pc this year, the slowest annual pace in nearly half a century and a sharp drop from 6.1pc last year.

DISRUPTIONS: Peru's Antamina copper mine, controlled by BHP and Glencore, said it would halt all operations for at least two weeks, while miner Freeport-McMoRan said it was conducting limited operations at the Cerro Verde copper mine, also in Peru.

"As Peruvian copper mines joined the rest of the world to suspend production, the supply risks have strengthened," analyst Helen Lau of Argonaut Securities said in a note, adding that around a third of China's feedstock for smelting activities was imported.

SPREADS: However, expectations of nearby surpluses can be seen in the discount for cash over the three-month copper at three-month highs of $29 a tonne, from levels near $3 a tonne on March 24.

Expectations of large surpluses also pushed the discount for the cash over the three-month aluminium contract to $40 a tonne last week, the highest since June 2015.

Three-month aluminium was up 1.1pc at $1,495.5 a tonne.

OTHER METALS: Zinc gained 1pc to $1,920.5, lead slipped 0.8pc to $1,707.5, tin added 2.6pc to $15,353, and nickel climbed 1.1pc to $11,803 a tonne.