Copper prices clawed higher on Tuesday as US-Iran tensions eased and investors expected leading metals consumer China to extend its stimulus policies.
Global equities steadied and oil pulled back from multi-month highs as investors judged the prospects of an all-out conflict between the United States and Iran had eased.
"The wider markets have paused, the equity moves have stabilised. I think everyone is now taking stock," said Colin Hamilton, director of commodities research at BMO Capital in London. "Even though we've seen tensions rise, the fact that China is still supportive is certainly helping industrial metals. It's been petty clear that the Chinese policy dynamics are still supporting growth and investment."
Data last week showed that Chinese business confidence shot up in December, lifting investor sentiment even though factory activity expanded at a slower clip. Three-month copper on the London Metal Exchange (LME) rose 0.2% to $6,149 a tonne in final open-outcry trading, extending a 0.2% gain in the previous session.
In Chile, copper output at state miner Codelco and BHP's sprawling Escondida mine fell in November, according to state copper agency Cochilco.
Copper inventories in LME-monitored warehouses have slumped by almost 60% since late August and are currently at 140,925 tonnes, the lowest since March 2019.
Copper stocks have been low for a while, "but the reality is no one has felt the need to chase prices higher", said Guy Wolf, global head of market analytics at brokerage Marex Spectron in Singapore. LME cash aluminium's discount to the benchmark three-month contract increased to $33 a tonne, its highest since September last year, having swung from a premium of $22.75 early last month. That indicates healthy supplies of metal for near-term use in the LME warehouse system.
LME aluminium dropped 0.9% to finish at $1,816 a tonne after hitting its highest since July 22 on Monday.
Zinc is bottoming out and expected to head back towards a resistance area around $2,448 to $2,458, said Commerzbank technical analyst Axel Rudolph.
LME zinc gained 0.9% to close at $2,346 a tonne, nickel rose 0.8% to $13,935, lead shed 0.7% to $1,906 and tin was up 0.9% at $17,005.
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