December 11, 2019 / 11:22 AM / 2 months ago

METALS-Copper hits highest level since July on hopes of U.S. tariffs delay

* GRAPHIC-2019 asset returns:

* Copper hits highest since July 19 (Updates with official prices)

By Zandi Shabalala

LONDON, Dec 11 (Reuters) - Copper prices touched a near five-month high on Wednesday on hopes that the United States would delay imposing more trade tariffs on goods from China, which would signal a detente in the dispute that has sapped metals demand.

Although a final decision had not been made, Washington was laying the groundwork for a postponement to the latest round of tariffs which are due on Dec. 15, according to sources.

“Prices are continuing to climb steadily higher today,” said Saxo Bank analyst Ole Hansen. “We have had the usual rollercoaster in the conflicting news on whether tariffs will be postponed.”

The technical picture for copper has improved significantly over the last week, Hansen said, adding that key technical and psychological support for the metal rested at $6,000 a tonne.

Benchmark copper on the London Metal Exchange (LME) had gained 0.1% to $6,108 a tonne in official rings, after touching its highest level since July 19.

The prolonged trade war has weighed on prices for the metal used in construction and power, limiting gains this year to 2.4%. Copper is also used as a gauge of economic health, which has faltered this year.

“As we approach the trade tariff deadline this Sunday, trade-related headlines over the remainder of the week will remain key for market sentiment,” ING said in a note.

“If tariffs were to get delayed, the market may still take this as a positive sign, as it would suggest that both sides are still working towards a deal.”

STOCKS: Declining stocks on the LME were supporting copper prices. Headline inventories fell to their lowest since April at 181,700 tonnes. MCUSTX-TOTAL

MARKET BALANCE: Overall, the copper market should see a deficit of 320,000 tonnes this year but this will flip into a surplus of 281,000 tonnes in 2020, the International Copper Study Group said.

SPREAD: The discount between LME cash and the three-month copper contract CMCU0-3 remained at a deep discount, of $30.25 a tonne, its biggest since Oct. 16, indicating sufficient nearby supplies.

CHINA DEMAND: Data this week from top copper consumer China, including falling smelter output and low car sales, pointed to weak demand for the metal and raised concerns about the health of Beijing’s economy.

EARNINGS SLUMP: Aurubis AG, Europe’s largest copper producer, posted a 42% slump in its annual earnings following scheduled maintenance shutdowns at major smelting plants, but said it expects the new fiscal year to be stable.

OTHER PRICES: LME aluminium was up 0.2% to $1,758 a tonne in official rings, zinc was down 0.2% to $2,224, lead was bid up 0.5% to $1,916; tin eased 0.1% to $17,375; while nickel was bid down 1.7% to $13,630 a tonne, after sinking to a five-month low in the previous session. (Reporting by Zandi Shabalala; Editing by Pravin Char and Alexandra Hudson)

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