Copper prices surged to their highest in nearly three weeks on Tuesday on some signs that the coronavirus pandemic may be slowing and on hopes that heavy bouts of stimulus will repair economic damage. Some analysts were wary, however, of the rally that swept industrial metals higher for a second day along with other risk assets such as stocks.
"I don't think that we're out of the woods yet. Demand issues are more severe than the reduction of supply and I think it's too early to say that it's all okay now. I won't be surprised to see lower or even much lower prices in the next few weeks," said Daniel Briesemann at Commerzbank in Frankfurt.
Three-month copper on the London Metal Exchange (LME) had climbed 3.3% to $5,045 a tonne by 1700 GMT, its highest since March 18.
Spot premiums for physical aluminium have fallen because of weak demand, with US levels down 20% in the past two weeks, Briesemann said. "The low aluminium premiums and, above all, the low aluminium prices are making life increasingly difficult for producers."
LME cash aluminium's discount to the three-month contract rose to $36 a tonne on Tuesday, its highest since September 2018, indicating healthy supplies.
LME aluminium rose 0.6% to $1,481 a tonne.
The rebound in LME zinc prices is to run out of steam, Commerzbank technical analyst Axel Rudolph said in a note, adding that it is heading back up towards the $1,970-$2,066 resistance zone.
LME zinc climbed 1.4% to $1,931 a tonne, nickel rose 1.6% to $11,470, lead surged 3.7% to $1,736.50 and tin jumped 3.6% to $14,800 a tonne. Both zinc and tin reached their highest since March 17.
Mainland China on Tuesday reported a drop in new coronavirus cases while data showed a slowdown of reported new infections in Italy and hard-hit parts of the United States.
"Now, as cases in Europe appear to get better and Chinese are out in the millions to tourist attractions ..., the market is cheering via this relief rally," one base metals trader said.
"The market is still waiting for China's fiscal stimulus. If patience wears out, this could very much be a bull trap."
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