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Hopes for China demand revival boost base metal prices

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 CMCU3 on the London Metal Exchange was up 0.7% at $9,221 a tonne at 0949 GMT, while aluminium rose 1.1% to $2,811 a tonne from an earlier one-week high at $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-19 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. FRX/

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

ALUMINIUM: Stocks MALSTX-TOTAL 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 CMAL0-3 to $25 a tonne from $36 a week ago.

COPPER: Stocks of copper in LME warehouses MCUSTX-TOTAL 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 CMCU0-3 was last at $25.60 a tonne, the highest since early March.

OTHER METALS: Zinc CMZN3 was up 1.6% at $3,546 a tonne, lead CMPB3 gained 2% to $2,101, tin CMSN3 added 3.1% to $34,405 and nickel CMNI3 slipped 3.3% to $26,350.
Source: Reuters (Reporting by Pratima Desai; additional reporting by Brijesh Patel in Bengaluru; editing by Barbara Lewis)

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