Shanghai copper prices climbed 1.74 percent on Tuesday, supported by expectations of rising consumption from China in coming months. The most-traded June contract on the Shanghai Futures Exchange rose to 61,360 yuan a tonne from 60,310 yuan at Monday's close.
Shanghai prices could rally further, boosted by China's consumption in next two months, which is expected to deplete stockpiles in Shanghai exchange warehouses and by positive momentum in London futures. "Do not worry about rising warehouse stocks. They will be quickly consumed by China's fabricators in April and May," said analyst Li Rong at Great Wall Futures in Shanghai.
"I think London copper will rise further as its stocks decline, and the fall in Shanghai copper inventories will solidify the market's upturned." Shanghai copper stocks have doubled since mid-February to 56,100 tonnes as metal flooded into China to take advantage of strong local prices.
At the same time, stocks monitored by the London Metal Exchange have fallen from above 216,000 tonnes to 192,175. LME copper for three-month delivery ticked $10 lower to $6,630 a tonne. "There is a chance that copper prices will get back towards $7,000, especially if we see a continuation of strong economic news from China," Andrew Harrington, analyst at Australia New Zealand Bank, said.
"The concern is that we will see rate cuts from the US Federal Reserve, which could be a kicker for base metals in the short term and prices could rise. But in the longer term, slowing growth will be less well-received." Mining shares continued to rally on strong base metals prices. BHP Billion, the worlds largest diversified miner, was up 1.4 percent in Sydney, while Rio Tinto gained 1.8 percent. Nickel eased $50 to $46,500 a tonne, but remained close to Friday's record $48,500 peak. "How much longer can you continue to make steel with what is almost a precious metal?" Harrington said.
Stocks of nickel in LME warehouses rose 138 tonnes to 3,702 tonnes, of which only 2,550 tonnes, or less than one day's global consumption, are available to the market.