Zinc, copper prices ride on China demand outlook

LONDON — Base metals rose on Tuesday on short covering amid optimism top consumer China will prop up its economy with stimulus measures and that the country’s currency is stabilizing.

Shares in Chinese infrastructure firms received a boost from expectations of increased spending on public works projects.

China Railway was reported in domestic media as saying China would boost its fixed asset investment in railways to 800 billion yuan ($117 billion) in 2018, an increase of 9.3% over its original plan.

“The Chinese government continuing to stimulate the economy is a good sign, but more importantly, the fact that the yuan is not making new lows versus the dollar seems to be pushing some short covering on the metals,” said Gianclaudio Torlizzi, partner at consultancy T-Commodity in Milan. “Last week, when the Chinese government tried to stop the yuan depreciating, was the trigger which supported the bottoming of the metals. I think August may be a bullish month for Chineserelated assets like metals.”

Three-month zinc on the London Metal Exchange (LME) closed 1.3% higher in final open outcry trading at $2,600 a ton after falling 2.4% on Monday.

Zinc has shed nearly a fifth since mid-June, largely due to fears about trade conflicts weighing on global growth and metals demand.

Zinc had the second-largest speculative short position on the LME, accounting for 21% of open interest at Friday’s close, according to estimates by Marex Spectron.

LME copper gained 0.7% to finish at $6,175 a ton, with gains tempered after BHP formally requested government mediation at its Escondida copper mine in Chile, the world’s largest, prompting the union to postpone the start of a planned strike.

“While the price of copper remains below the $6,378 level on a daily chart closing basis, we will expect the 200-week moving average at $5,788.96 to be reached,” Commerzbank technical analyst Axel Rudolph said in a note.

LME aluminum dipped 0.3% to end at $2,038 a ton. LME onwarrant inventories — those not earmarked for delivery — fell to the lowest level since September 2007, LME data showed on Tuesday.

LME nickel climbed 1.2% to finish at $13,850 per ton, supported by a rally in Chinese steel prices to their strongest since April 2012 amid production curbs.

Metals were supported by a weaker dollar index, which slipped 0.3%, its biggest drop in a week. Lead closed 1.6% higher at $2,149 a ton and tin added 0.3% to $19,575. —