Base Metals Weekly Round-Up: Copper Hits 8 Month High, Then Falls

Economic data out of China sent three month London Metal Exchange (LME) copper up to US$6,300 per metric ton (MT) on Friday (January 17).

The country reported a 6.9 percent year-on-year increase in industrial output in December, along with a 5.4 percent increase in fixed-asset investment over the same period. Its GDP was at its weakest level in almost three decades last year, but on track with expectations.

China is the world’s largest consumer of copper by far, and the health of its economy is a key point to watch for copper market participants.

Friday’s US$6,300 price level is slightly under the eight month high copper hit earlier in the week, when — as investors waited for news on a US-China trade deal — the red metal climbed to US$6,321 on the LME.

“Copper and the rest of the base metals have come a long way already — partly driven by the trade talks, the Phase 1 deal and the improvement in the Chinese economy,” Jens Pedersen, an analyst at Danske Bank, said at the time.

Beijing and Washington ultimately signed a phase one agreement on Wednesday (January 15), marking the beginning of the end of over a year of tensions between the two powerhouse nations.

Among other things, the deal will see China commit to spending an additional US$200 billion on American goods and services by 2021. China will also be more transparent about moves geared at influencing the strength of its currency.

Despite the positive step forward, the two countries still have much more to do, with one senior US Chamber of Commerce official saying that this week’s phase one arrangement “stops the bleeding” but will not put an end to trade negotiations.

Although copper climbed ahead of the deal, the news itself brought little reaction. Reuters states that market watchers don’t think the initial agreement will have much impact on economic growth; the metal was at just US$$6,293.50 on the LME on Thursday (January 16).

In terms of other base metals, zinc on the LME trended up this week, settling at US$2,437.50 per MT at close of day Thursday. Nickel saw a midweek drop to US$13,670 per MT before closing out Thursday at US$14,285, while lead spiked above US$2,000 per MT this week after starting the period below US$1,900.

For its part, iron ore was at US$94.55 per MT after trading relatively flat for the week.

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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.