LONDON: Copper prices bounced on Monday as hopes for stimulus in top consumer China and sliding stocks in Shanghai triggered a flurry of buying ahead of inflation data from the United States this week.
Traders said buying on the London Metal Exchange (LME) to take advantage of lower prices than those on the Shanghai Futures Exchange (ShFE) was also behind copper’s gains.
Benchmark copper on the LME was up 1.4% at $9,121 a metric ton by 1023 GMT. That compared with prices around $10,130 on ShFE, helping to create what is known as arbitrage trade.
“Arb buying is providing impetus and Chinese inflation data has got people thinking about stimulus again,” one metals trader said, adding that U.S. inflation numbers on Wednesday would be a factor in any interest rate decision at next week’s U.S. Federal Reserve meeting.
Fed rate cuts would help to boost economic activity and demand and weigh on the U.S currency, making dollar-priced metals cheaper for holders of other currencies.
Copper heads for second weekly fall on global growth concerns
Latest data showed that Chinese producer price deflation worsened in August, reflecting a struggling economy.
However, copper inventories in warehouses monitored by ShFE are at six-month lows of 215,374 tons and down 36% over the past three months, suggesting more robust demand in China.
Another indication of healthier Chinese copper demand is the Yangshan premium at about $62 a ton, having been at a discount in July.
Elsewhere, focus is on large futures positions on the LME to buy aluminium in October and sell in November, which has created a premium, or backwardation, of about $10 a ton for the October contract over November.
Three-month aluminium was down 0.1% at $2,339 a ton.
In other metals, zinc climbed 1.1% to $2,747 a ton, lead rose 0.4% to $1,971, tin was up 0.2% at $31,095 and nickel advanced 0.5% to $15,975.
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