SMM: (LME) copper prices on the London Metal Exchange closed lower on Tuesday, but remained near a two-year high after strong manufacturing data from China boosted confidence in the outlook for demand.
China is the world's largest consumer of copper.
Copper for delivery in three months fell 0.51 per cent, or $34.50, to close at $6761.50 a tonne, within striking distance of a 26-month high of $6830 a tonne set in early September.
Analysts said the metal market was boosted by positive sentiment that boosted global equities, while the renminbi jumped to a 16-month high against the dollar, making metals cheaper for Chinese buyers.
Kieran Clancy, an analyst at Capital Macro (Capital Economics), said: "Chinese data show that the environment for industrial metals, especially copper, is still very favorable."
The market has digested the impact of a strong rebound in Chinese demand, with copper futures up more than 50 per cent from their March low, but copper prices are still expected to rise slowly, the analyst said.
China's industrial production accelerated in August, while retail sales rose for the first time this year, suggesting that the economic recovery is accelerating as demand began to improve more broadly in the wake of the novel coronavirus crisis.
According to data released on the website of the National Bureau of Statistics on Tuesday, industrial production increased by 5.6% in real terms in August from a year earlier, 0.8 percentage points faster than in July, which is higher than the market estimate of 5.1% and the highest so far this year. On a month-on-month basis, the added value of industries above scale increased by 1.02% in August over the previous month. In August, retail sales of consumer goods totaled 3.3571 trillion yuan, an increase of 0.5 percent over the same period last year, higher than market expectations and the first positive growth so far this year.
China's aluminium production rose 2.3 per cent in August from July, a record high for the second month in a row.
Us industrial production rose for the fourth month in a row in August, but the recovery showed signs of stress. Although interest rates on industrial capacity are gradually rising, inflation is also rising.
A separate report released on Tuesday showed that u.s. import prices rose 0.9% in august, more than expected, due to a general rise in commodity prices.
A group of 50 Democratic and Republican congressmen is scheduled to release a $1.5 trillion bailout bill for novel coronavirus on Tuesday.
Stocks of copper with warehouse receipts in LME registered warehouses increased by 9400 tonnes to 45950 tonnes, but are still well below the May high of about 250000 tonnes.
LME spot copper rose to $16.25 over three-month copper, indicating a recent tight supply.
Investors are now focused on the decision announced at the end of the Fed's policy meeting on Wednesday. This is the first meeting since Federal Reserve Chairman Colin Powell announced that he is more tolerant of inflation. Powell actually promised to keep interest rates low for a longer period of time.
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