LONDON: Copper prices hit a two-month high on Wednesday ahead of a Chinese government meeting this week expected to boost demand with pledges of higher spending on infrastructure, and on hopes for a global economic recovery.
The Chinese government typically announces new plans and economic targets at the annual National People's Congress session which starts on May 22 and is closely watched for signs of demand increases for metals.
"The recent rally will be in anticipation of the NPC meeting over Thursday and Friday, where expectations are for big infrastructure investment figures," said BMO Capital Markets analyst Tim Wood-Dow.
He attributed a rise in metals prices in later trade to stronger global equities, which gained on optimism over the reopening of the US economy and hopes for further stimulus in Europe.
China accounts for nearly half of annual global copper consumption estimated at 24 million tonnes.
"China is looking very strong; stocks are drawing, the cathode premium increasing, operating rates at wire and cable fabricators are high but the rest of the world remains questionable," Wood-Dow said.
Benchmark copper on the London Metal Exchange (LME) gained 1.6% to $5,441.50 a tonne by 1700 GMT after touching a March 13 high of $5,455.
In signs of continued recovery from the coronavirus, China's refined copper output in April rose 9.2% compared to a year earlier and was 6.2% higher than the previous month.
The LME copper net speculative short sits at 14% of open interest or 23,000 lots as of Monday, according to broker Marex Spectron. This is down from the year-to-date peak of 26% of open interest on April 1.
Indicating strong demand, the Yangshan copper premiums are currently assessed at $113.5 a tonne, the highest since Oct. 2018. They are paid on top of LME copper prices to import metal into China.
US-China tensions simmered on Tuesday after Washington imposed sanctions on a China-based company it accused of acting on behalf of US-blacklisted Mahan Air, a move which Beijing called "illegal".
The premium of LME tin cash over the three-month contract was last at $130 a tonne, indicating near-term supply tightness. The premium reached $175 a tonne last week, its biggest since June 2019.
LME tin gained 0.9% to $15,500 a tonne, aluminium rose 1.3% to $1,511, zinc climbed 0.4% to $2,041, lead added 0.6% to $1,692.50, while nickel was up 1.7% to $12,670.