By Ed Ballard
LONDON--Copper prices climbed on Tuesday after data showed inflation picked up in China last month, sending a reassuring signal about demand from the world's largest consumer of industrial metals.
The London Metal Exchange's three-month copper contract was up 1.2% at $5,655.50 a metric ton, with other base metals also in positive territory.
China's Producer Price Index rose 5.5% last month, higher than analysts' expectations and up from 3.3% in November, the National Bureau of Statistics said late Monday.
Analysts said a fourth straight month of rising prices suggests China's economy is on a firmer footing. Looking ahead, Chinese trade data due Thursday should shed more light on the strength of Chinese demand.
A weaker greenback was also supporting metals Tuesday, making dollar-priced commodities cheaper for holders of other currencies. The WSJ Dollar Index was 0.07% lower at 92.58, down just over 1% for the year so far after surging in the last weeks of 2016.
Analysts at Citi said they expect production outages to push the copper price above $6,000 a ton this year. Citing data from consultancy firm Wood Mackenzie, they pointed to unusually low levels of mine disruption in 2016, and said the situation is likely to return to normal this year.
"The 2017 growth rate was supported [by] much faster-than-expected project ramp-ups in Peru in particular, and much lower than statistically normal rates of production losses through the year. We believe both of these factors will be difficult to replicate in 2017," Citi wrote.
A reduction in copper stocks in LME warehouses points to a slightly tighter market, another supportive factor for prices in the short term. Stock levels have fallen below 300,000 tons this week after surging above 345,000 tons in late December.
Aluminium was up 1.1% at $1,740 a ton, zinc up 1.7% at $2,725 a ton, lead up 1.7% at $2,140.5 a ton, tin up 0.1% at $21,145 a ton and nickel up 0.9% at $10,470 a ton.
Mark Magnier in Beijing contributed to this article.
Write to Ed Ballard at firstname.lastname@example.org
(END) Dow Jones Newswires
January 10, 2017 06:55 ET (11:55 GMT)
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