Hopes for China demand revival boost base metal prices; copper rises 1%

Prices of industrial metals rose on Monday as top consumer China's plans to ease COVID restrictions raised expectations of a demand revival, but the damage to growth from the lockdowns limited gains.

Benchmark copper on the London Metal Exchange was up 1% at $9,254 a tonne at 1602 GMT, while aluminium was 1.4% higher at $2,828 a tonne after earlier touching a one-week high of $2,865 a tonne.

"China's zero-COVID lockdown policy, energy-driven inflation, rising real U.S. rates and a strengthening dollar are driving demand headwinds," said BNP Paribas analyst David Wilson.

Wilson expects "sustained ex-China market tightness, rising European smelter costs, and reduced second half 2022 China aluminium exports" to support aluminium.

CHINA: Shanghai set out plans on Monday for the return of more normal life from June 1 and the end of a COVID lockdown that has lasted more than six weeks.

China's economic activity cooled sharply in April as lockdowns took a heavy toll on industrial production and employment, adding to fears the economy could shrink in the second quarter.

UNITED STATES: Higher interest rates and expectations of further rises have boosted the U.S. dollar, which when it rises makes dollar-priced commodities more expensive for holders of other currencies.

POWER: Record high power prices in Europe have pushed up costs of producing metals such as aluminium and zinc in Europe.

ALUMINIUM: Stocks in LME-approved warehouses at near-17-year lows of 532,500 tonnes and record low on-warrant stocks - metal available to the market - at 260,075 tonnes reflect the tightness in the aluminium market outside of China.

Worries about availability on the LME has narrowed the discount for the cash over the three-month aluminium contract to $25 a tonne from $36 a week ago.

COPPER: Stocks of copper in LME warehouses have been rising, but cancelled warrants at 42% suggest significant amounts of metal will be delivered out over coming days.

The premium for the cash over the three-month copper contract was last at $25.60 a tonne, the highest since early March.

OTHER METALS: Zinc was up 3.2% at $3,601 a tonne, lead gained 1.6% to $2,093, tin added 1.4% to $33,830 and nickel slipped 2.5% to $26,575.