Copper climbed to an eight-month high on Thursday after the United States and China inked an initial deal in a prolonged trade dispute, boosting hopes for a revival in metals demand.
“Fundamentally, the picture for copper is a lot better than it was last year, and from a macro point of view everything looks better in terms of the trade deal,” BMO Capital Markets analyst Timothy Wood-Dow said.
“We can’t see the Phase One trade deal having a huge effect on base metal prices, (but) the resultant stability will be an incremental positive.”
Key issues lingered between the world’s two largest economies because some tariffs remained in place even as China pledged to boost purchases of U.S. goods and services by $200 billion.
Benchmark copper on the London Metal Exchange (LME) was bid up 0.7% at $6,325 a tonne after failing to trade in official rings. The metal used in power and construction earlier touched its highest since May 1 at $6,340.
CHINA DATA: The negative impact of the trade dispute was laid bare in data from top metals consumer China on Thursday.
China’s new home prices grew at their weakest pace in 17 months in December, while new bank lending fell more than expected last month even as lending for 2019 as a whole hit a record.
More monetary easing and fiscal stimulus is expected this year to spur growth in China, analysts say, which bodes well for metals demand.
INVENTORIES: Supporting prices were declining stocks of copper in LME-approved warehouses, which shed 1,275 tonnes to 126,775 tonnes. This was their lowest level since March, and they have declined over 60% since August. MCUSTX-TOTAL
COPPER SPREAD: The widening of the discount of LME copper cash over the three-month contract CMCU0-3 pointed to a well-supplied market, however. It hit $34.50 a tonne, its highest in over three months.
TECHNICALS: Copper’s next technical target is $6,433 a tonne, the 50% Fibonacci retracement level, according to broker Marex Spectron.
SUPPLY: Diversified miner South32 Ltd said its manganese ore production slipped in the second quarter, but that it had cut its South African trucking costs.
OTHER PRICES: Aluminium prices were up 0.7% at $1,814 a tonne, after touching a one-week high. Zinc and lead rose to their highest in two months, with zinc adding 1.3% to $2,416.50 and lead gaining 1.4% to $2,026.
Tin firmed 1% to $17,625 and nickel inched 0.9% higher to $14,360.
