Onome Amuge
Copper prices closed August at their highest level in more than a month, buoyed by expectations of a US interest rate cut and signs of firmer demand in China, the world’s biggest metals consumer.
Three-month copper on the London Metal Exchange rose 0.6 per cent to $9,875 a metric tonne on Friday, after briefly touching $9,917, its strongest level since July 25. The metal gained 3 per cent over the month, extending a rally that has been supported by currency moves and improving macroeconomic data.
“Part of it is because the dollar is a bit weaker. But there has also been some strong data recently, such as upward revision of US second-quarter GDP growth,” said Dan Smith, head of research at Commodity Market Analytics. “We are also heading for September, which tends to be a better month for demand than the summer period,” he added.
The US dollar was on track for a 2 per cent decline in August, its biggest monthly retreat this year, making dollar-denominated commodities cheaper for overseas buyers. Market expectations have also shifted towards the Federal Reserve cutting rates before year-end, which investors believe could stimulate demand across industrial sectors.
In China, where property weakness has weighed heavily on metals consumption in recent years, indicators of a recovery in appetite for copper have begun to emerge. The renminbi is set for its sharpest monthly gain against the dollar since May, while copper inventories monitored by the Shanghai Futures Exchange fell 2.4 per cent for the week. The Yangshan copper premium which is a closely watched gauge of demand for imports into China held at $55 a tonne, its highest since early June.
“Chinese buyers are showing signs of returning to the market, encouraged by the stronger yuan and low stock levels. Premiums are firming, which usually points to better demand momentum,” said one Shanghai-based trader.
Other base metals also advanced on the LME. Aluminium rose 0.4 per cent to $2,615 a tonne, zinc gained 1.2 per cent to $2,814, lead inched up 0.1 per cent to $1,986 and nickel added 0.7 per cent to $15,375.
Tin led gains with a 1.5 per cent rise to $35,325 after briefly touching $35,390, its strongest level in nearly five months. Market analysts pointed to tightening supply as inventories in both LME and Shanghai warehouses remain low. Production disruptions have also constrained ore flows from Myanmar’s Wa State, a key supplier.
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