LONDON: Copper prices rose to three-week highs on Monday as hopes for stronger demand were boosted by easing COVID restrictions in top consumer China, while a higher dollar in afternoon trade weighed on sentiment.
Benchmark copper on the London Metal Exchange (LME) was down 0.8% at $8,385 a tonne at 1708 GMT after touching $8,555 for its 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 at its lowest in seven months.
The dollar, meanwhile, rose after US data showed factory orders rising above consensus in October and an unexpected pick up in service sector activity in November.
A higher US currency makes dollar-priced metals more expensive for holders of other currencies, which could subdue demand.
“We expect consumption to weaken further into November and remain soft in the months ahead,” analysts at Citi said.
“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,” they said Aluminium, meanwhile, slipped 1.4% to $2,511 a tonne from an earlier $2,577, its 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 rose 1% to $3,109, lead gained 1.3% to $2,232, tin climbed 4.8% to $24,375 and nickel ceded 1.2% to $28,520.