SINGAPORE  - Copper prices fell on Thursday on investor doubts that the recently signed U.S.-China trade agreement would improve metals demand.

Three-month copper on the London Metal Exchange (LME) eased 0.1% to $6,283.50 a tonne by 0401 GMT, while the most-traded copper contract on the Shanghai Futures Exchange (ShFE) fell 0.2% to 49,250 yuan ($7,153.96) a tonne.

Washington and Beijing signed a Phase 1 trade deal on Wednesday that will roll back some tariffs and boost Chinese purchases of U.S. products, defusing an 18-month row that has hurt global economic growth and metals demand.

But investors are worried that the pact would not substantially boost metals demand as the deal left a number of sore spots unresolved, while demand has not improved significantly to support prices.

"Copper is a bit over-stretched. The signing of the phase one deal is pretty much priced in. There was no surprise to the market," said a Singapore-based metal trader.

"There's not much demand on the physical side and inventory has been low for quite some time. Once the market prices all of these in, it cannot fuel another rally," said the trader.

LME copper has gained as much as 7.4% since Dec. 5 last year over optimism of the trade deal.

FUNDAMENTALS

COPPER: Copper inventories in LME-approved warehouses fell to a 10-month low of 128,050 tonnes on Tuesday, latest data showed.

SPREAD: However, the discount between LME cash and three-month contract expanded to a more than three-month high of $34.50 a tonne, suggesting no nearby supply shortage.

TECHNICALS: LME three-month copper is facing a resistance of $6,371.54 a tonne while its supporting level stands at $6,225.47 a tonne, Reuters commodities and energy technical analyst Wang Tao said.

PRICES: ShFE aluminium climbed to a three-week high of 14,145 yuan a tonne, while LME aluminium advanced 0.2% to $1,805 a tonne. Aluminium is the only base metal making a loss so far this year on the LME, down 0.2%.

SQUEEZE: An analyst and a trader said a major aluminium producer, holding long positions, is squeezing the market amid low stocks in ShFE warehouses and taking advantage of the easing trade tension between the United States and China.

STOCKS: Headline aluminium inventories in warehouses tracked by ShFE hit their lowest in nearly two years in late December at 185,127 tonnes, an 81% drop from a record high of 993,207 tonnes in 2018. Stocks had since picked up to 193,899 tonnes on Friday, latest exchange data showed.

PRICES: LME nickel fell 0.5% to $14,255 a tonne, while tin rose to a four-month high of $17,600 a tonne. In Shanghai, nickel jumped 2% to 111,420 yuan a tonne and lead climbed 1.5% to 15,225 yuan a tonne.

PRICES

Three month LME copper

Most active ShFE copper

Three month LME aluminium

Most active ShFE aluminium

Three month LME zinc

Most active ShFE zinc

Three month LME lead

Most active ShFE lead

Three month LME nickel

Most active ShFE nickel

Three month LME tin

Most active ShFE tin

ARBS ($1 = 6.8843 Chinese yuan renminbi) (Reporting by Mai Nguyen; Editing by Subhranshu Sahu and Shailesh Kuber)

© Reuters News 2020