Short covering boosts copper as inventories slide

LONDON — Copper received a boost from short covering and falling inventories on Friday following steep losses that had been driven by trade tensions.

The gains were broad- based throughout the base metals complex, with zinc and nickel, mainly used in the steel sector, also bolstered by increases in Shanghai steel prices.

“There really hasn’t been any good news and the Chinese economic data was disappointing, so it looks like a bit of short covering and technical trading,” said Caroline Bain, chief commodities economist at Capital Economics in London.

There could be more downside to prices, she added, noting: “Prices have probably overreacted to the trade tensions, but at the same time, I don’t see any reason for investor sentiment to become any more positive in the short term.”

US President Donald Trump said he was ready to impose tariffs on an additional $500 billion of imports from China, threatening to escalate a trade clash ahead of last weekend’s meeting of the financial leaders of the world’s 20 biggest economies in Buenos Aires.

Three- month copper on the London Metal Exchange (LME) was bid up 1.4% in closing open outcry activity at $6,147 a ton. On Thursday it sank to $ 5,988, its lowest since July 2017.

Copper, which has shed 16% since touching a four-and-a-half year peak in early June, fell 1.5% last week.

Shanghai Futures Exchange copper inventories dropped 10% in the week ended Friday to 211,319 tons and are down 31% since late March. LME stocks have slid 34% since late March.

Copper got support after a union representing workers at Lumina Copper’s Caserones mine in Chile said on Thursday that contract negotiations with the company had failed, paving the way for a potential strike.

Nickel and zinc, used in the steel industry, were bolstered after Shanghai rebar futures recovered from early falls, extending gains into a third session and marking their biggest weekly jump in seven on concerns about lean supply.

Nickel, mainly used in stainless steel, ended 1.5% higher at $13,530 and zinc, largely used for galvanizing steel, gained 1.2% to $ 2,575. Shanghai nickel stocks slipped by 9.9% and zinc stocks fell to their lowest since December 2007.

LME aluminum closed 1.4% higher at $2,029. The speculative short in LME aluminum is modest at 3.6% of open interest, broker Marex Spectron said in a note.

Lead added 0.90% to end at $2,135 while tin slipped 0.10% to $19,475. —