US-China negotiations on trade lift copper prices

JOHANNESBURG — Copper and most other base metals edged higher on Tuesday as investor appetite for riskier assets returned following a sell-off in the previous session.

Three-month benchmark copper on the London Metal Exchange (LME) closed up 1.3% to $6,168 a ton.

“We are back on risk on trade and we are seeing a small recovery in metals as well but we can’t make too much of it,” said FOREX.com analyst Fawad Razaqzada, adding that prices for metals would be volatile ahead of next week’s US Federal Reserve meeting.

Boosting equities and metals were discussions between representatives of China and the US over the road map for the next stage of their trade talks on Tuesday.

All five key LME base metals are on track to post a yearly drop in 2018, with copper and zinc both down more than 20% year to date on concerns the US-China trade friction will hurt demand. “Negative market sentiment stemming from the US-China dispute has outweighed tight fundamentals for base metals,” Fitch Solutions said in a 2019 commodities outlook, noting that stocks at LME warehouses continued to fall.

Headline stocks of copper in warehouses monitored by the LME fell 1,200 tons to 121,300 tons, the lowest since July 2008.

Concerns remained over lackluster demand from China after copper imports fell three percent in November from a year ago but they were up 8.6% from October.

“China’s trade data has not provided relief to the slowdown fears, putting pressure on aluminum and copper prices,” said Julius Baer Commodities Research Analyst Carsten Menke. “Against the backdrop of a cooling global economy, we do not project a major pickup in demand.”

China’s banks extended more new loans than expected in November after a sharp drop the previous month, in a sign that recent government pressure on lenders to help struggling smaller firms may be starting to bear fruit.

On-warrant inventories of aluminum in LME-monitored warehouses jumped four percent to 829,500 tons, and are up 36% since the start of October.

Mining group Anglo American expects its production to rise more than previously expected in 2018 and 2021 while costs are seen lower for this year, its chief executive officer said on Tuesday.

LME aluminum finished up 0.1% at $1,939 a ton; zinc ended 0.6% higher at $2,590; lead rose 1.3% to $1,974.50; tin gained 0.9% to $19,125. Nickel bucked the trend, closing 0.3% lower at $10,770.