SYDNEY—London copper rose on Tuesday, underpinned by a weaker dollar and after solid inflation figures shored up sentiment in China, while planned plant closures there supported Shanghai zinc and lead prices.
China’s producer prices surged the most in more than five years in December as prices of coal and other raw materials soared, adding to expectations that global inflation may be stronger in 2017.
The pick-up in prices reinforces views that the world’s second-largest economy is on steadier footing heading into the new year, underpinned by stronger factory activity and domestic demand which is being driven by a lending and construction boom.
But metals trading is expected to stay cautious and copper largely in range until next month as traders stay cautious ahead of the inauguration of U.S. President-elect Donald Trump and possible profit-taking in China before the Lunar New Year.
“I do think there is still a lot of uncertainty around the Trump impact and what that will mean for the dollar in the short- to medium-term, and that is keeping things a little bit cautious in the metals market,” said ANZ strategist Daniel Hynes in Sydney.
Three-month copper on the London Metal Exchange CMCU3 climbed by 1 percent to $5,644.50 a ton, having closed flat in the previous session. Prices last Thursday rose to their highest in more than a fortnight at $5,698 a ton.
Shanghai Futures Exchange copper SCFcv1 climbed 1.4 percent to 46,110 yuan ($6,658) a ton. The U.S. dollar slid versus a basket of major currencies on Tuesday with the dollar index .DXY down 0.2 percent to 101.73.
zinc ended up 5.1 percent and lead SPBcv1 gained 3.9 percent.
Chinese zinc and lead producer Yunnan Chihong said on Thursday it planned to shut down several plants and take impairments on others hit by high operating costs and low profitability and that did not conform with China’s supply-side reforms.
Processing fees for China’s zinc smelters reached record lows last month.
“We’ve seen these announcements trickling through for a little while now, driven by the low treatment charges and lack of concentrate - they seem to be adding up,” Hynes added.
The global zinc market in 2017 is expected to fall into a deficit for a second year. That helped to drive prices 60 percent higher in 2016. The Australian government has offered “substantial” financial support to help repair Alcoa Corp’s aluminium smelter in Victoria that was crippled last month by a state-wide blackout, government ministers said on Monday. – Reuters