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LME Copper Holds 8-Month Peak On Hopes Over Trade Deal, Improvement In Chinese Economy

13 Jan 2020 6:37 pm
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Mumbai (Commodities Control) – Copper prices held near eight-month highs on Monday ahead of the signing of a U.S.-China 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 last year, 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 at the end of the year.

Benchmark copper on the London Metal Exchange (LME) was down 0.1% at $6,194.50 a tonne by 1203 GMT. 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 a long 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, market is wary about the further progress in trade talks. They add that China's economy may not improve more than it already has. Most experts see copper prices levelling off around these levels.

China will release data this week including industrial production, trade, GDP and new loans. December export and import growth is expected to have improved, helped by a rebound from a low base.

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.

China's Vice Premier Liu will visit Washington over Jan. 13-15 to sign a trade agreement.

World stock markets ticked higher and were near record highs. 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.

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.

The discount for LME cash copper against the three-month contract rose to $27.75, suggesting no shortage of nearby metal.

New Chinese standards for high-grade copper and aluminium scrap will come into force from July 1.

(Commodities Control Bureau +91-22-40015502)

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