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Copper hits seven-month high on worries about tight supply

* GRAPHIC-2019 asset returns: (Updates with closing prices)

By Eric Onstad

LONDON, Dec 17 (Reuters) – Copper touched a new seven-month peak on Tuesday as investors began looking beyond the U.S.-China trade deal to potential shortages next year due to production problems.

Three-month copper on the London Metal Exchange (LME) climbed to an intraday high of $6,223 a tonne, the strongest since May 8, before retreating to $6,200 in final open-outcry trading, up $1 from Monday’s close.

The so-called Phase One trade deal between Washington and Beijing has been “absolutely completed”, a top White House adviser said on Monday.

Kieran Clancy, assistant commodities economist at Capital Economics, said “the obvious catalyst” for the climb in the copper price was news about the trade deal.

“But really in the background I think that probably reflects in some part that copper’s actual fundamentals should be quite bullish for prices,” he said.

“We’ve had major mine outages, both planned and unplanned, which have been weighing very heavily on smelter output. We’re very much caught between two stories and I think the fundamental story is the one that’s trying to break out now.”

Capital Economics expects the LME copper price to rise to $6,400 a tonne by the end of 2020, he added.

Helen Lau of Argonaut Securities was also positive about copper. “We see lots of signs of recovery in China’s domestic economy… and the Chinese government said 2020 fiscal support will be more effective,” she said.

* CHINA COPPER: China’s refined copper output rose 19.6% year-on-year to a record monthly high of 909,000 tonnes in November, data showed on Tuesday.

* COPPER SPREAD: The discount of LME cash copper over the three-month contract <CMCU0-3> tightened to $6 a tonne, a level not seen in seven and a half months, suggesting nearby supplies are tightening.

Inventories in warehouses approved by the LME dropped to 162,225 tonnes, the lowest since March 13. <MCUSTX-TOTAL>

* LEAD/ZINC BALANCES: The global zinc market flipped to a surplus of 7,300 tonnes in October, while the global lead market deficit contracted to 2,400 tonnes, data showed.

* NICKEL BALANCE: The global nickel market deficit widened slightly to 1,300 tonnes in October, data showed.

* TIN TECHNICALS: “LME tin … has now risen above the October high at $17,240 and thus still targets the early July low and the September high at $17,585/$17,775,” Commerzbank technical analyst Axel Rudolph said in a note.

He said the market might reach targets of $18,585 and $18,685 which is where prices fell to in May and June.

* PRICES: LME aluminium shed 0.8% in closing rings to $1,764 a tonne, while nickel dropped 1.7% to $13,960, reversing after touching $14,290, its highest since Nov. 28.

Zinc shed 0.4% to finish at $2,281 a tonne, lead edged up 0.03% to $1,888 and tin gained 0.9% to $17,325.

* For the top stories in metals and other news, click or (Additional reporting by Mai Nguyen in Singapore; Editing by Jane Merriman and David Evans)

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