LONDON: Copper prices hit a two-week high on Friday and were on track for their strongest week since July on support from a weaker dollar and hopes that economic stimulus in top consumer China will boost demand.
Three-month copper on the London Metal Exchange was up 0.9% at $9,297.50 a metric ton by 1552 GMT after touching $9,314.5, its highest price since Aug 30. Aluminium and zinc also touched their two-week highs.
The US currency was under pressure, making dollar-priced metals more attractive for buyers using other currencies, with the US Federal Reserve widely expected to start cutting interest rates next week. “One first rate cut is likely to boost sentiment in the base metals complex,” said Ewa Manthey, a commodities analyst at ING.
“Longer term, weaker dollar and falling borrowing costs that will come with that cut will help demand, providing relief for construction and other interest-sensitive sectors.” China’s central bank said on Friday that its policy would strive to expand domestic demand, focusing more on consumption.
The country’s new bank loans growth in August missed expectations, though total social financing numbers, a gauge of future metals consumption, jumped and exceeded a Reuters poll forecast. Copper, which is used in the power and construction industries, has lost 16% since a May rally pushed it to a record high of $11,104, helped by speculative buying on potential shortages resulting from future demand.
With the price fall, which was mainly because of the unwinding of investor positioning, Chinese buying has picked up and there has been some restocking activity ahead of China’s long October holiday. Copper inventories in warehouses monitored by the Shanghai Futures Exchange fell 45% over the past three months to 185,520 tons, the lowest level since February. Analysts at Macquarie expect copper prices to average $9,100 this quarter before recovering in the fourth quarter, subject to a decline in visible stocks. In other metals, LME aluminium was up 2.5% at $2,475, zinc added 2.0% to $2,912.50, lead rose 0.4% to $2,033.50, tin gained 1.4% to $31,860 while nickel retreated 1.2% to $15,945.