Copper prices held steady overnight, bolstered by expectations of seasonally strong Chinese demand in the second quarter and low stocks but capped by concern over the impact of continuing trade tensions on the global economy.
Benchmark copper on the London Metal Exchange closed little changed at $US6,425 a tonne, down 0.1 per cent, with prices having traded in a $US200 range since the middle of February.
‘The second quarter is normally the strongest in terms of physical activity; stocks are low and supply tightness is evident in metals like copper,’ said Societe Generale analyst Robin Bhar.
‘Our concerns would be the macro overlay, slowing global growth and the unresolved US-China trade dispute.’
China accounts for about half of global demand for industrial metals, which increases in the April to June period because of restocking ahead of rising construction activity in the second quarter.
Investor sentiment on trade has see-sawed on rumblings coming out of the negotiations between the world’s two biggest economies after the imposition of tit-for-tat tariffs.
‘The uncertainty over US-China trade could be decisive for industrial metals in the short term,’ ANZ analysts said in a note.
‘We see renewed supply issues in some of the metals, copper and zinc, which could widen the market deficit. This leaves little room for replenishing depleted inventories.’
Copper inventories of 183,825 tonnes in LME-approved warehouses are up from less than 112,000 tonnes last Tuesday but still more than 30 per cent below levels last August.
Higher stocks have shrunk the premium for the cash contract over three-month copper to about $US30 a tonne from $US70 in early March.
Stocks of zinc under LME warrant are down nearly 80 per cent since August to less than 60,000 tonnes, creating a large premium for the cash contract over three-month metal.
The premium was last at $US50 a tonne.
In contrast, stocks in warehouses monitored by the Shanghai Futures Exchange have climbed above 124,000 tonnes from around 20,000 tonnes at the end of last year.
Combined with an estimated 80,000 tonnes of zinc stocks in bonded warehouses in Shanghai, that takes the total in China to more than 200,000 tonnes.
Aluminium closed 1.2 per cent up at $US1,920.50 a tonne, zinc dipped by 0.3 per cent to $US2,781, lead slipped by 1.1 per cent to $US2,040, tin added 0.5 per cent to $US21,175 and nickel firmed by 0.1 per cent to $US12,950.