Copper Steadies After Hitting 14-Month High on Fund Buying

COPPER - LONDON. Copper prices steadied on Tuesday after hitting a 14-month high as fund buying offset the impact of higher inventories.

Three-month copper on the London Metal Exchange (LME) was down 0.1% at $9,399.5 a metric ton by 1513 GMT after touching $9,523 for its highest since January last year.

This was a rally on expectations driven by macroeconomic factors rather than fundamentals, one trader said, adding that more funds are betting on higher forward prices of copper.

Banks and analysts have raised their price targets, including Citi, which expects copper to hit $9,700 in three months, up from its previous projection of $9,200.

Fund buying remained brisk in the West and China's reopening on Monday generated catch-up buying after an initial bout of selling, Marex consultant Ed Meir said in a note.

The most-traded May copper contract on the Shanghai Futures Exchange earlier touched a record high of 76,700 yuan a ton.

Some traders are wary of the rally, however, saying it could be limited by rising copper inventories.

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A total of 10,900 tons of copper arrived at LME-registered warehouses in South Korea, Taiwan and Singapore, data showed on Tuesday. 

Cash copper was trading at a record discount of $134.75 to three-month prices in another sign of ample copper availability.

The sharp rally in LME copper futures created a price gap with SHFE in China, home to the world's largest copper smelters. The gap reached its widest since 2013 on Tuesday, creating opportunities to capture differentials between the two.

"The arbitrage today is deeply profitable for Chinese exports into LME warehouses," a second trader said.

Copper was also supported by the prospect of output cuts in China over shortages of mined copper raw material.

In other metals, tin reached a 14-month high of $31,350 a ton and last traded 4.2% up at $31,115.

Zinc touched $2,727.50 for its highest since April 2023 and was last up 1.1% at $2,691.

Prices of metal used to galvanise steel plummeted to a three-year low last May, triggering a series of zinc mine and smelter closures.

Macquarie analysts expect zinc to flip from a surplus to a narrow deficit this year.

LME aluminium was down 0.6% at $2,447.5 a ton, lead edged up 0.4% to $2,151.50 and nickel was up 1.9% at $18,190.