LONDON: Copper prices rose to three-week highs on Monday as hopes for stronger demand were boosted by easing of COVID restrictions in top consumer China, expectations for further reopening of the country’s economy and a softer dollar.
Benchmark copper on the London Metal Exchange was up 0.3% at $8,479 a tonne by 1122 GMT, having risen to $8,550 a tonne earlier, the highest since Nov. 14.
China’s zero-COVID policy has become a global outlier as most countries seek to live with the disease, though the country took 20 new measures to streamline controls last month amid rising public frustration.
“Futures are trading on the idea of China reopening and the softer dollar,” said Sucden Financial analyst Geordie Wilkes, adding that a full reopening in China was some way off.
“But the physical market is not as tight as it was and demand is poor.”
Weak fundamentals were highlighted last week with the release of China’s official manufacturing purchasing managers’ index (PMI), which at 48.0 for November was the lowest in seven months.
Copper falls on China COVID protests but dollar supports
Federal Reserve officials indicating less aggressive rate hikes than previously suggested has seen the dollar retreat against other major currencies.
A lower U.S. currency makes dollar-priced metals cheaper for holders of other currencies, which could boost demand.
“The physical outlook appears dire,” analysts at Citi said.
“We expect consumption to weaken further into November and remain soft in the months ahead … metals offtake will fall as global growth slows and supply-chain restocking demand fades now that finished goods inventory has recovered to more normal levels.”
Meawhile, aluminium was down 1.1% at $2,517 a tonne from an earlier $2,577, the highest since June 16.
“Rising Covid cases combined with a seasonal slowdown have seen spot (aluminium) demand weaken,” Citi said.
“Supply growth in China is gradually returning … This could pave the way for an eventual stock build ahead of Chinese New Year and put a cap on prices.”
In other metals, zinc was up 1.6% at $3,129, lead gained 0.7% to $2,219, tin climbed 4% to $24,200 and nickel fell 1.9% to $28,300.