London - Copper hit a three-week high on Tuesday as last week's strong US report helped fuel hopes that the world's largest economy will spur global growth, and as copper stocks trended lower.
The better-than-forecast increase in US job hirings in April, which pushed the unemployment rate to a four-year low, has come as copper stocks fall in both Shanghai and on the London Metal Exchange.
Latest data showed Shanghai stocks at 213,782 tonnes, their lowest since late February, while LME stocks are at 604,600, their lowest since early April, having hit their highest in nearly a decade in late April.
“We can see continued recovery closer to $8,000 a tonne this quarter. There's a lack of scrap especially in China, premiums have increased, there's a backwardation on Shanghai markets, things have tightened up because prices have been so low,” said Societe Generale analyst Robin Bhar.
He added, however: “This is certainly not the start of a new bull run, it's just a corrective bounce.”
Three-month LME copper was up 0.56 percent at $7,305.75 a tonne by 11:17 SA time. It hit a session high of $7,374, its loftiest since April 15. Copper rose more than 6 percent on Friday when the US jobs numbers were released.
In other markets, world shares rose near a 5-year high on growth optimism spurred by the US jobs report, and helped also by the European Central Bank's readiness to push its key deposit rate into negative territory if needed.
LME copper has risen by 7 percent in the last two trading sessions, but remains down nearly 8 percent for the year. Last month it hit its lowest in a year and a half last month following weak growth data from China.
Despite copper's recent price gains, ANZ analysts said they expect commodity markets to consolidate in May, notwithstanding the expectation of stronger seasonal demand.
“The first quarter underperformance of Chinese growth has put many investors on the sidelines. (Meanwhile) the new government is looking for long-term rather than short-term solutions. While we do expect Chinese demand to improve, the stronger seasonal demand profile may end up being lukewarm.”
China is the world's top copper consumer, accounting for some 40 percent of overall consumption.
Its refined copper imports fell 36.7 percent from a year ago to 218,823 tonnes in March, but the steep fall in London copper prices in mid-April has opened the window for Chinese imports, with benchmark LME copper currently trading at a discount of about $39 to its Shanghai counterpart.
“Chinese metals apparent demand has outperformed expectations year to date. The near term could thus see bouts of short covering, (but there are) growing expectations that Chinese demand will weaken into the second half,” said Macquarie in a note.
Investors are now waiting for a batch of April data from China, for more clues on global growth. Chinese trade data will be released on Wednesday, inflation on Thursday and money supply and loan growth expected from Friday.
Aluminium edged up 0.03 percent to $1,890.75 a tonne, while stainless-steel ingredient nickel fell 0.76 percent to $15,085 a tonne.
“We think the aluminium and nickel markets look best placed for relief rallies. A substantial 45 percent of global nickel producers and an astonishing 64 percent of global aluminium producers are not making money at current spot prices,” said ANZ.
In other metals, tin fell 0.49 percent to $20,350 a tonne, zinc, edged up 0.03 percent to $1,885.50, while lead rose 0.38 percent to $2,045.75. - Reuters