Copper climbs, but high China stocks suggest ample supplies

LONDON: Copper climbed on Tuesday as the prospect of interest rate cuts, a weaker dollar and some strong data from China encouraged buying, but elevated stocks and rising production of the metal in the top consumer signalled ample supplies.

Benchmark copper on the London Metal Exchange (LME) was up 1.1% at $10,435 a metric ton at 1030 GMT. The metal used to make cable for wiring hit a record high above $11,100 last week as speculators and investors piled in expecting demand growth to accelerate.

Interest rate cuts would help economic growth, while a lower U.S. currency makes dollar-priced metals cheaper for holders of other currencies, boosting demand.

Traders also cited robust industrial profits in China as a reason behind copper’s gains.

Much of the copper buying since early March has been based on the idea of consumption outstripping supply due to growth areas including electric vehicles, automation and artificial intelligence.

“I buy the future demand story. I just think prices have got way ahead of where the fundamentals are. The market looks relatively well supplied currently, particularly in China,” said BNP Paribas analyst David Wilson.

Copper slips on interest rate worries, lacklustre demand in China

“Shanghai copper stocks are up 240% year-on-year and there are deliveries going into LME warehouses. China’s daily refined copper production rate is the joint highest in record.”

On a daily basis, China’s average copper output stood at 38,000 tons in April.

Copper stocks in warehouses monitored by the Shanghai Futures Exchange at 290,376 tons are near four-year highs and compare with numbers near 30,000 tons in January.

Meanwhile, copper inventories at 114,750 tons have been increasing since the middle of May.

Later this week, industrial metals markets will be watching U.S. inflation data for clues to the timing of interest rate cuts by the Federal Reserve and surveys of purchasing managers in China’s manufacturing sector to assess demand prospects.

In other metals, aluminium was up 1.5% at $2,702, zinc rose 1.3% to $3,098, lead advanced 1.5% to $2,333, tin added 2.1% to $33,945, nickel gained 0.8% to $20,405.