Copper Prices Surge Amidst Strong Chinese Demand

London: On Tuesday, copper prices experienced an uptick, fueled by robust demand from China, a leading consumer, ahead of the approaching May holiday. Market sentiment was also influenced by concerns regarding tight regional supply and a strengthening of the yuan.

Benchmark three-month copper on the London Metal Exchange (LME) increased by 0.9%, reaching $9,458.50 per metric ton at 1019 GMT. However, it encountered resistance near its 50-day moving average of $9,489.

According to Arthur Parish, an analyst at SP Angel, a trend of restocking is underway in China in anticipation of the May Day holiday. The mainland China market is set to close from May 1st for a five-day Labour Day holiday.

The Yangshan copper premium, a gauge of demand for copper imports into China, was last observed at $93 per ton, marking its highest level since December 2023.

This premium has risen by 6% since Friday, following official data revealing a 32% weekly decrease in copper inventories held in warehouses monitored by the Shanghai Futures Exchange.

Alastair Munro, senior base metals strategist at broker Marex, anticipates a further decline in these inventories in the next SHFE data release on Wednesday, emphasizing that this factor will remain significant throughout May.

Impact of US-China Trade Dynamics on Copper Market

Parish noted that the restocking requirement was amplified after inventories were redirected from Asia to the U.S. due to the tariff-driven surge in COMEX premiums.

Copper inventories in COMEX-owned warehouses have increased by 40% this month as Washington persists with its investigation into potential new U.S. copper import tariffs, keeping the Comex premium over the LME benchmark at a notably elevated $1,443 per ton.

The spread between the LME cash copper and the three-month contract broadened the premium to $30 a ton, contrasting with a discount of $16.5 a week prior, suggesting tighter immediate supply within the LME system.

The International Copper Study Group projects that the surplus in the global copper market will expand to 289,000 tons this year, up from 138,000 tons last year, and will continue into the following year.

The strengthening of China’s yuan to a one-month high against the dollar on Tuesday further bolstered Chinese buying activity.

In other London metals trading, aluminium increased by 1.3% to $2,465 a ton, zinc rose by 1.2% to $2,663, lead gained 0.2% to $1,970, tin advanced by 0.5% to $32,155, while nickel decreased by 0.1% to $15,595.