Copper prices held near eight-month highs on Monday ahead of the signing of a U.S.-China Phase 1 trade deal and Chinese data that will show whether a pick-up in economic activity has been maintained.
China is the largest consumer of metals, but its economy slowed in 2019, partly owing to the trade dispute with Washington, pushing down industrial metals prices.
Factory output in China began to contract last year but returned to expansion in November and Decmember. Benchmark copper on the London Metal Exchange (LME) traded up $2 at $6,200 a tonne in official rings. Prices rose more than 5% last month to touch $6,266.50, their highest since May.
“Copper and the rest of the base metals have come along way already – partly driven by the trade talks, the Phase 1 deal and the improvement in the Chinese economy,” said Danske Bank analyst Jens Pedersen.
However he said further progress in trade talks would be difficult and China’s economy may not improve more than it already has. “Copper prices will probably level off around these levels,” he said.
CHINESE DATA: China will release data this week including trade, GDP and new loans. December export and import growth is expected to have improved, helped by a rebound from a low base, a Reuters poll showed.
CHINESE AUTO SECTOR: The China Association of Automobile Manufacturers (CAAM) expects a 2% fall in vehicle sales in the world’s largest car market this year after an 8.2% drop in 2019.
TRADE WAR: Chinese Vice Premier Liu will visit Washington on Jan. 13-15 to sign a trade agreement.
GLOBAL MARKETS: World stock markets ticked higher and were near record highs.
YUAN: China’s currency strengthened sharply against the dollar, taking its gains since the start of December to about 2% and making dollar-priced metals cheaper for buyers in China.
UK: Britain’s economy grew in November at its weakest annual pace in more than seven years.
COPPER STOCKS: Headline copper inventories in LME-registered warehouses fell by 2,725 tonnes to 130,000 tonnes, down 60% from August and the lowest since March.
SPREAD: The discount for LME cash copper against the three-month contract grew to $27, suggesting no shortage of nearby metal.
POSITIONING: Speculators cut their net short in LME copper to 5.7% of open contracts by Thursday, from 17% at the end of last month, broker Marex Spectron said.
CHINA SCRAP: New Chinese standards for high-grade copper and aluminium scrap will come into force from July 1.
OTHER METALS: LME aluminium did not trade but was bid down 0.8% at $1,792 a tonne, zinc was bid 1% lower at $2,352, nickel was bid 0.6% higher at $14,270, lead traded up 1% at $1,912 and tin was bid flat at $17,250.