Copper edged lower on Friday but remained on track for a second week of gains as investors decided a plunge in prices triggered by the coronavirus outbreak in China may have been overdone.
Some are betting the economic impact of the epidemic will be brief and damage to metals demand will be offset by supply disruption caused by efforts to contain the spread of the virus.
China is the biggest consumer and producer of metals.
Benchmark copper on the London Metal Exchange closed 0.5 per cent down at $US5,760 a tonne but was up about 1.5 per cent over the week.
Prices of the metal used in power and construction have recovered from a low of $US5,523 on February 3 but remain down about 9 per cent from their January high.
“People are a little bit hesitant,” said BMO analyst Colin Hamilton, citing significant uncertainty over how the coronavirus epidemic will develop.
However, he said there is increasing confidence among investors that Chinese economic activity and metals demand would pick up strongly from the second quarter.
Helping copper’s move higher were speculators abandoning short positions, analysts said. The net short in LME copper fell to 7 per cent of open contracts on Wednesday, down from 15 per cent on February 4, according to brokerage Marex Spectron.
China said it had recorded 121 more deaths and 5,090 new coronavirus cases on Thursday, taking the total number of infected to 63,851.
The Chinese economy will expand by 4.5 per cent in the current quarter, according to a Reuters poll of economists. That would be the slowest growth for about a decade, though the economists said the downturn would prove short-lived if the outbreak is contained.
The coronavirus is expected to shave up to 0.2 per cent from Japan’s economic growth this year, a Reuters poll found.
Euro zone economic growth slowed as expected in the last three months of 2019, but employment picked up more than expected.
Copper inventories in warehouses registered with the Shanghai Futures Exchange (ShFE) surged to 262,738 tonnes from about 135,000 tonnes in early January.
Zinc and lead stocks also rose sharply.
The US dollar was strengthening towards two-year highs reached in October, pressuring metals by making them more expensive for buyers with other currencies.
The European Commission said it has opened an investigation into whether China is dumping aluminium extrusions.
LME aluminium ended down 1.5 per cent at $US1,722 a tonne, zinc fell 1.2 per cent to $US2,149, nickel lost 2.1 per cent to $US13,015, lead slipped 1 per cent to $US1,873 and tin closed down 0.4 per cent at $US16,525.
Nickel, lead and tin were up this week, while zinc and aluminium were roughly flat.