Copper rebounds on plans for Chinese, global stimulus

LONDON — Copper prices rebounded on Tuesday from more than three-year lows in the previous session as coronavirus cases dropped in China and nations around the world geared up to pump stimulus into their economies.

Other industrial metals also bounced, along with oil and equity markets, with the United States and Japan among those announcing plans to counter the impact of the virus and support economic growth.

Also lifting sentiment was a visit by Chinese President Xi Jinping to the outbreak epicenter in the central city of Wuhan after a sharp drop in new cases in mainland China in the past week.

“We’re relatively confident that we’ve seen the bottom (for prices), but it will depend on whether we see a second (virus) breakout in China or any real deterioration in the numbers for the Western world,” said analyst Timothy Wood-Dow at BMO Capital in London.

“China seems to be gearing up for a big amount of stimulus. That will be in the form of infrastructure investment, which is base-metals heavy, and will really hit the economy later in the year.”

Wood-Dow said the stimulus in top metals consumer China was expected to total around 6-8 trillion yuan, equivalent to around 8% of GDP.

Benchmark three-month copper on the London Metal Exchange (LME) gained 0.6% to $5,566 a ton in final open-outcry trading after sinking to $5,433 on Monday, the weakest in more than three years.

LME zinc has the largest net speculative short position on the exchange at 34% of open interest, the highest since November 2015, based on data from Friday, according to estimates by broker Marex Spectron.

LME zinc shed 0.2% to close at $1,976 a ton.

Factories in China slowly coming back online raised hopes of an uptick in demand.

“In China, the semi-fabricator industry is improving slowly,” CRU Group analyst He Tianyu said, adding that demand from the construction and infrastructure sectors was also improving, albeit at a slower pace.

The utilization rate at copper semi fabricators, which process the metal into products such as wirerod or tubes, has picked up to 60% from 40%-50% a week earlier as more people return to work, the analyst added. —