Copper heads towards five-month high on China demand optimism

China's copper smelters cut concentrate processing fees

  
Image used for illustrative purpose. An employee carries copper hoses at the Sociedade Paulista de Tubos Flexiveis (SPTF) metallurgical company which manufactures flexible metal hoses, in Sao Paulo April 20, 2012.

Image used for illustrative purpose. An employee carries copper hoses at the Sociedade Paulista de Tubos Flexiveis (SPTF) metallurgical company which manufactures flexible metal hoses, in Sao Paulo April 20, 2012.

REUTERS/Nacho Doce/File Photo

LONDON- Copper prices scaled five-month highs on Monday, boosted by optimism about demand in top consumer China and concerns about the spread of COVID-19 in Chile, the world's largest producer.

Benchmark copper CMCU3 on the London Metal Exchange was up 1.7% at $6,118 a tonne at 1432 GMT. Prices of the metal used widely in the power and construction industries earlier touched $6,136 a tonne, the highest since Jan. 22.

"Copper is most exposed to China, the country that came out of the crisis first, where we think real demand will recover to last year's levels," said Julius Baer analyst Carsten Menke.

"The market seems to think Chile will close mines to contain the coronavirus. That risk should not be underestimated, but Chile's economy is geared toward copper, it is dependent on revenues from the mining sector."

DEMAND: Chinese demand can be gauged from its imports of copper at 436,030 tonnes in May, down 5.5% from April, but up more than 20% year on year.

CHINA: Stronger growth prospects in China have also boosted the country's blue-chip stocks, which jumped to 5-year highs on Monday, as policy easing and capital market reforms triggered investor buying.

"Although demand has picked up in China, the recovery in other Western markets has been more muted," Edward Meir, analyst at ED&F Man Capital Markets said in a note.

"Moreover, mine supply disruptions are still not tipping any of the complexes we follow into deficit, as demand retrenchment has more than offset any issues having to do with supply."

CHILE: Chile's copper industry is nearing a tipping point as the new coronavirus explodes across the country, mine workers and analysts say, laying bare the hidden costs of policies that have until now salvaged its output of the red metal.

OTHER METALS: Aluminium was up 1% at $1,631 a tonne, zinc rose 1.2% to $2,051, lead added 0.3% to $1,786, tin gained 1.1% to $17,020 and nickel climbed 2.5% to $13,325.

(Reporting by Pratima Desai; editing by Ed Osmond/Emelia Sithole-Matarise/Jane Merriman) ((pratima.desai@thomsonreuters.com; +44 207 542 5113))

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