Copper prices held near two-year highs on Tuesday, supported by expectations of stronger demand from top consumer China, where a government-led infrastructure push has led to robust activity in the construction sector.
Benchmark copper on the London Metal Exchange traded down 0.5 percent at $6,336 a tonne in official rings.
The metal widely used in power and construction hit $6,430 on Monday, its highest since May 2015.
“China data shows things humming along in manufacturing and construction. That’s the positive,” a copper trader said. “The weak dollar also makes things easier for base metals, though there is some profit-taking going on.”
CHINA DATA: The official manufacturing purchasing managers’ index (PMI) showed a 12th straight month of expansion, as China poured funds into a construction boom. A private PMI survey meanwhile showed manufacturing growth quickened in July.
DOLLAR: The dollar index near 14-month lows makes industrial metals denominated in the U.S. currency cheaper for non-U.S. firms, which could boost demand.
SCRAP: News that China may ban imports of some scrap metal started copper’s rally from below $6,000 last week. The ban is set to come into effect from the end of 2018. China is the world’s largest importer of scrap.
“The market was primed for the upside and scrap happened to be a reasonable cover story,” said Macquarie analyst Vivienne Lloyd. “But medium- to long-term it doesn’t change the balance at all.”
SHIFT: “Most of the preparation of this scrap type is likely to simply shift offshore from south China to other developing Asia, and we note the Philippines, Thailand and Malaysia have recently seen increases to both volumes of scrap flow to China and implied copper content (by value),” Lloyd said.
EUROPE: Euro zone growth remained robust in the second quarter, while manufacturing grew strongly in July.
TIN: Three-month tin traded down 0.9 percent at $20,460 a tonne, but close to the $20,905 a tonne hit last week, its highest since the middle of January on worries about supplies from top producer China.
NICKEL: LME nickel traded 0.1 percent lower at $10,205 a tonne, bolstered by supply concerns and expectations of stronger demand from Chinese stainless steel mills.
PHILIPPINES: The Philippines’ environment minister said he would not lift a ban on open-pit mining imposed in April in an anti-pollution crackdown. The Philippines is the world’s top nickel ore supplier.
INDONESIA: However, Indonesia’s energy and mining ministry has recommended that two companies be issued nickel export permits for a combined 2 million tonnes.
PRICES: Aluminium did not trade but was bid down 0.5 percent at $1,908, lead was bid 0.5 percent lower at $2,323 and zinc was bid down 0.6 percent at $2,779 a tonne.