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LONDON - Copper prices climbed to their strongest in two weeks on Tuesday as optimism about new infrastructure projects in top metals consumer China and concern about mine supply spurred speculators to buy back more short positions.
Three-month copper on the London Metal Exchange gained 1.8% to $7,615 a tonne in official open outcry trading after touching the highest since July 11 on the third straight day of gains.
Copper has rallied about 10% since touching a 20-month low on July 15, largely due to hopes for a recovery in China after COVID-19 lockdowns depressed an already slowing economy.
"This week China's policy banks started the first round of new investment projects," said Xiao Fu, head of commodity market strategy at Bank of China International in London.
"So we could see a speed up of infrastructure projects, which seems to be stabilising market confidence and propelling more short-covering."
In June, local governments in China issued more than twice the amount of special bonds for infrastructure than in May and the highest monthly amount since at least 2019, data from the finance ministry showed on Tuesday.
Sentiment was also buoyed by news on Monday that China plans to launch a $44 billion real estate fund to help property developers resolve a crippling debt crisis.
The most-traded September copper contract on the Shanghai Futures Exchange closed 3% higher at 58,890 yuan ($8,718.24) a tonne.
Prices also got impetus from worries about supply as some miners struggled with output.
Chinese miner MMG Ltd said on Monday it had suspended its copper production targets for the year, while last week Vale SA and Antofagasta Plc also trimmed copper output guidance.
"These miners ... have been struggling to meet the bottom end of their guidance ranges and in some cases lowering below," said CRU analyst Craig Lang in Singapore.
The production issues have come amid falling LME inventories and rising physical premiums.
The Yangshan premium in China has risen to $84.50 a tonne, the highest since January, indicating tight near-term supplies.
In other LME metals, aluminium advanced 0.7% to $2,425 a tonne, nickel added 0.3% to $22,290, zinc climbed 2.1% to $3,047, lead added 0.3% to $2,009 and tin gained 1% to $24,875.
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(Reporting by Eric Onstad, Additional reporting by Mai Nguyen in Hanoi, Editing by Louise Heavens, Kirsten Donovan)