London: Copper prices climbed to one-week highs on Wednesday after reports of fresh stimulus in top consumer China and signs of progress in Sino-US trade talks reinforced expectations of stronger growth and demand.
Benchmark copper on the London Metal Exchange traded up 1.2% at $5,980 a tonne in official rings. Earlier, the metal used widely in power and construction touched $6,008, its highest since 31 December.
“Depreciation of the Chinese currency and the stimulus effect will start to come through and Chinese data will start to improve, a major positive for industrial metals," said Guy Wolf, global head of market analytics at brokerage Marex Spectron.
“Chinese data coming through confirms that growth slowed significantly, but this is all rearview mirror stuff."
Currency: The Chinese yuan has fallen nearly 10% against the dollar since March last year. This will help its export industry, a large part of China’s economy.
Stimulus: Latest comes from a state planning officer saying China plans to introduce policies to boost domestic spending on items such as autos and home appliances this year as part of wider efforts to boost consumption in China.
The National Development and Reform Commission (NDRC) will also introduce policies in house leasing and services, as well as elderly and child care, with plans to also lower investment barriers in other sectors such as culture and sports.
Autos: China’s most globally high-profile and successful carmaker, Geely, is forecasting flat sales this year, a sharp slowdown from 2018 as the country’s giant auto market struggles with slowing economic growth and more cautious consumers.
Rates: “The central government has already started to encourage local governments to resume and speed up major projects, as evident in accelerating project approvals by the NDRC in October," analysts at Societe Generale said in a note.
“More RRR cuts is a foregone conclusion and we argue that the PBoC should begin to lower interest rates."
Trade: China’s foreign ministry said on Wednesday that the latest round of trade talks with the United States had concluded, with the results to be released soon.
Grasberg: Exports of copper concentrate from Indonesia’s Grasberg mine, the world’s second-largest copper mine, are expected to drop to 200,000 tonnes this year from around 1.2 million tonnes in 2018.
Technicals: Copper is testing resistance at the 21-day moving average, currently around $6,008. A break above could see momentum pick up for a test of $6,110, where the 50- and 100-day moving averages appear to be converging.
Prices: Aluminium slipped 0.1% to $1,862 a tonne, zinc rose 0.3% to $2,492.5, lead climbed 0.4% to $1,977, tin gained 1.0% to $20,145 and nickel added 0.6% to $11,260.