Stronger China demand prospects propel copper to five-week peak

Copper prices climbed to five-week highs on Monday after the lifting of Covid-lockdowns in top consumer China boosted demand prospects while dwindling inventories provided further support.

Benchmark copper on the London Metal Exchange (LME) was up 2.4% at $9 726 a tonne by 09:27 GMT, having earlier touched its highest since April 27 at $9,916.19.

“China has slowly been reopening and has been announcing policy measures to support the economy … the market appears to continue to be pricing in a further rebound in Chinese activity over the coming months,” said Citi analyst Max Layton.

“We agree with this directionally but remain cautious as we still believe a timely and decisive rollout of stimulus measures, over and above what has been announced, from China is required to support prices at current levels.”

CHINA: Beijing and Shanghai have been returning to normal in recent days after two months of isolation.

STIMULUS: China’s cabinet last week announced a package of 33 measures covering fiscal, financial, investment and industrial policies to revive its pandemic-ravaged economy. Read full story

China’s central bank, meanwhile, said it will strengthen the implementation of its prudent monetary policy and bring forward steps to support the economy.

INVENTORIES: Stocks of copper in LME-registered warehouses, at 140 975 t, have dropped more than 20% since the middle of May. 

Cancelled warrants – metal earmarked for delivery – at 34% indicate that more metal is due to leave the LME system.

TECHNICALS: Support for copper comes in around $9 700, where the 200-day moving average currently sits, and resistance to higher levels comes from the 50-day moving average at about $9 840.

DOLLAR: Support for industrial metals also comes from a weaker U.S. currency, which makes dollar-priced commodities cheaper for holders of other currencies. 

OTHER METALS: Aluminium was up 1.7% at $2 773/t, zinc rose 0.7% to $3 892, lead gained 0.5% to $2 179, tin slipped 0.7% to $34 700 and nickel climbed 5.5% to $29 670.