April 3, 2019 / 10:55 AM / 10 months ago

METALS-Base metals rise on optimism over trade talks, Chinese data

(Updates with closing prices)

By Peter Hobson

LONDON, April 3 (Reuters) - Prices of copper and other industrial metals rose on Wednesday as strong Chinese manufacturing data and reports of progress in U.S.-China trade talks bolstered the demand outlook.

Copper also reflected indigenous leaders in Peru rejecting talks with the government to end disruption at a major mine.

Benchmark copper on the London Metal Exchange (LME) closed up 1 percent at $6,492 a tonne, near last month’s eight-month high of $6,555.50.

Metals prices have been stuck in a narrow range since late February, but strong Chinese purchasing managers’ index (PMI) data and positive signals from trade talks are lending support, BMO analyst Kash Kamal said.

“Pessimism is dissipating,” he said.

CHINA ECONOMY: The Chinese Caixin/Markit composite manufacturing and services PMI rose to a nine-month high in March, adding to signs that stimulus is gradually kicking in.

China is the world’s largest consumer of metals.

TRADE TALKS: The United States and China expect to make more headway in trade talks this week, White House economic adviser Larry Kudlow said.

“It’s a larger, grander discussion than anything we’ve had before in U.S.-China trade relations, and there’s a certain amount of optimism,” Kudlow said.

The dispute pushed metals prices sharply lower last year.

GLOBAL MARKETS/DOLLAR: World stocks rallied to six-month highs, while the dollar weakened, helping metals by making them cheaper for buyers with other currencies.

PERU: An indigenous community that has blocked roads to the copper mine has decided not to negotiate with the government further until the group’s lawyers are freed from jail.

The blockade has halted exports from Las Bambas, which produces about 400,000 tonnes of copper a year, accounting for about 2 percent of global production.

COPPER SPREAD: Cash copper on the LME has flipped from a $70 premium to the three-month contract last month to an $8 discount, suggesting a supply shortage has eased. CMCU0-3

OUTLOOK: “The overall picture is of a (copper) market in significant surplus and therefore lacking fundamental support in the first quarter of this year,” Barclays analysts said in a note, pointing to a build-up in inventories in China that has offset a decline in LME warehouses. CU-STX-SGH MCUSTX-TOTAL

They said however that demand would likely improve, forecasting an average copper price of $6,230 this year and $6,350 in 2020.

NORSK HYDRO: The company said it could take months to return its Karmoey aluminium plant in western Norway to full capacity after a power outage that cut production by about 10 percent.

OTHER METALS: LME aluminium ended up 0.4 percent at $1,896 a tonne, zinc finshed 2.6 percent higher at $2,930, nickel gained 2.2 percent to $13,375 and lead rose 1.4 percent to $2,012. Tin bucked the trend, slipping 0.1 percent to $21,175.

Reporting by Peter Hobson; Additional reporting by Mai Nguyen; Editing by David Holmes, Jan Harvey and Alexandra Hudson

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