Copper prices headed for their biggest quarterly rise in ten years on China rebound

Copper prices headed for their biggest quarterly rise in ten years on Tuesday, as resurgent Chinese demand, supply disruption and global stimulus fed a bounce from March’s four-year lows.

Benchmark copper on the London Metal Exchange (LME) was up 1% at $6,018.50 a tonne at 1600 GMT, after hitting its highest level since Jan. 23.

The metal used in power and construction is up around 22% in the last three months and is now just below its January high of $6,343, before the coronavirus spread worldwide.

Behind the gains are “supply fears driven by coronavirus spreading in major copper producing countries like Chile and Peru (and) the recovering economy, above all in China,” said Commerzbank analyst Daniel Briesemann.

A close above $6,000 could fuel further buying, but supply and demand fundamentals justify a level around $5,500 and prices will eventually fall, he added.

CHINA: Factory activity in China quickened in June, beating expectations. The total new orders index also brightened, but export orders continued to contract and factories cut jobs.

STOCKS: On-warrant copper inventories in LME-registered warehouses fell by 1,200 tonnes to 111,650, the lowest since Jan 17. MCUSTX-TOTAL

Stocks in Shanghai Futures Exchange (ShFE) warehouses at 99,971 tonnes are the lowest since January 2019. CU-STX-SGH

SUPPLY: Freeport Indonesia’s production of copper concentrate and copper ore were both below its initial targets this year.

POSITIONING: Speculators are betting on higher copper prices, with a net long on the LME equal to 3.6% of active contracts by Friday, the biggest since January, brokers Marex Spectron said.

OTHER METALS: LME aluminium was up 0.5% at $1,617 a tonne, zinc fell 0.9% to $2,044, nickel was flat at $12,810, lead slipped 1.4% to $1,777 and tin was down 0.4% at $16,705.

All were up between 2% and 14% in the second quarter.