Copper hit a seven-month high on Friday and was set for a fifth straight weekly gain after a US-China trade deal dispelled some worries over the health of the global economy, though it retreated from the day’s peak as the US dollar firmed.
Benchmark copper on the London Metal Exchange (LME) ended down 0.6 per ent at $US6,175 a tonne after reaching $US6,235.50, the highest since May 7.
It was up nearly 1.0 per cent last week and more than 5.0 per cent this month.
“Copper had a good run and is holding its own,” said Commerzbank analyst Daniel Briesemann, adding that optimism after the US and China agreed a “phase one” trade deal had lifted base metals and would support prices for some time.
But he said a “phase two” deal would be harder to achieve and global economic growth would weaken further next year, dragging copper to about $US5,500 by mid-2020.
US Treasury Secretary Steven Mnuchin said the United States and China would sign their phase one pact in early January.
The US House of Representatives overwhelmingly approved a new North American deal that leaves $US1.2 trillion in annual US-Mexico-Canada trade flows largely intact.
China kept its lending benchmark rate unchanged but markets expect further monetary easing in 2020 to arrest an economic slowdown in the world’s biggest metals consumer.
Growth nudged up in the third quarter, the government confirmed.
World stocks touched record highs and the US dollar strengthened.
On-warrant copper inventories in LME-registered warehouses fell to 110,350 tonnes, the lowest since March, after 8,325 tonnes of cancellations.
The global refined copper market had a 81,000-tonne deficit in September and 393,000-tonne shortfall for the first 9 months of the year, the International Copper Study Group (ICSG) said.
The ICSG said in October the copper market would move to surplus next year.
“Copper open interest (OI) has increased notably across each of the three main exchanges (LME/Comex/SHFE) and is in aggregate up by around 1.3 million tonnes over the past month – a pace not seen since the 2016 US presidential election,” Citi analysts said in a note.
This pointed to an increase in speculative bets on higher prices, they said, adding that prices were likely to rise to about $US6,500 by mid-2020.
Fitch Solutions said in a note copper would average $US5,700 a tonne in 2020, down from $US6,000 this year, as global economic weakness persisted.
Chinese Yangshan copper import premiums fell to $US59 from $US85 in September, suggesting weakening demand for overseas metal.
LME aluminium closed up 0.2 per cent at $US1,800 a tonne, zinc rose 0.7 per cent to $US2,341, nickel gained 2.5 per cent to $US14,525 and tin finished 0.2 per cent lower at $US17,340.
Lead did not trade in closing rings but was bid up 1.0 per cent at $US1,938.