Copper prices hit their highest level in three years and nickel touched a two-year peak on Monday as signs of strong Chinese economic growth boosted the outlook for demand. Industrial metals mostly rose, despite a nuclear test by North Korea that pushed down global stock markets and boosted safe haven assets. "Copper continues to enjoy the tailwind from the outlook in China," Saxo Bank analyst Ole Hansen said. A recent strengthening of the Chinese yuan against the dollar was also helping metals to rally, said Hansen. A stronger yuan makes dollar-priced metals cheaper for China, which is the world's largest metals' consumer.
Benchmark copper on the London Metal Exchange closed up 1.2 percent at $6,917 a tonne after touching $6,924, the highest since September 2014. Prices have been supported by a surge in speculative momentum buying, with hedge funds and money managers raising their net long position in copper to a fresh record last week. Analysts at Commerzbank said copper and other industrial metals were overbought: "Prices have become largely detached from the fundamental data ... the potential for and possible extent of a price correction are increasing every week."
Fibonacci resistance kicks in at around $7,200 a tonne, when prices will have recouped half the losses of a 2011-2016 downtrend, said Hansen. Headline stocks in LME-registered warehouses fell by 2,625 tonnes to 223,500 tonnes, near their lowest since early March, supporting prices. China saw solid growth in the first half and data last week showed China's manufacturing sector unexpectedly accelerated in August, suggesting the economy is still expanding at a healthy clip.
Factories across Asia and Europe cranked up production last month as global demand remained strong, confounding expectations growth may have peaked. Chinese rebar futures rose as much as 5 percent on Monday to the highest since February 2013. The rally in Chinese steel pushed stainless steel ingredient nickel to a peak of $12,380, its highest since June 2015. It finished up 1.8 percent at $12,250 a tonne. A global aluminium producer has offered Japanese buyers a premium of $100 per tonne for primary metal shipments during the October to December period, down 15 percent to 16 percent from the current quarter.
The Shanghai Futures Exchange (ShFE) will cut transaction fees on some nickel and tin futures from September 7. LME aluminium did not trade but was bid down 0.8 percent at $2,119 a tonne; zinc closed 0.6 percent higher at $3,205; lead was bid down 0.2 percent at $2,390; and tin ended 0.8 percent higher at $20,790.