Industrial metals rally as China stimulus boosts demand outlook

HONG KONG (Bloomberg) - Lead and zinc rallied to the highest this year and copper advanced to a three-week high as China stepping up stimulus boosted the demand outlook in the biggest consumer.

Copper climbed as much as 1.9 per cent, while lead and zinc rose more than 1 per cent. The People's Bank of China lowered the reserve-requirement ratio, or the amount of cash lenders must hold in reserve, by 1 percentage point effective April 20, the central bank said on its website Sunday. The reduction, the second this year and the largest since November 2008, comes after data last week showed the second-largest economy expanded at the weakest pace since 2009 last quarter.

"Estimates are that this reduction in reserve requirements immediately releases the equivalent of around $200 billion for lending in the Chinese economy," said Michael McCarthy, a chief strategist at CMC Markets in Sydney. "Given the impact it has on the global market for commodities, that's expected to provide a significant boost to consumption and therefore prices."

Copper for delivery in three months on the London Metal Exchange climbed to as much as US$6,173 a metric ton, the highest intraday level since March 26. Prices traded at US$6,111.50 a ton at 10:25 a.m. in Hong Kong. In New York, July futures advanced 0.6 per cent to US$2.7865 a pound, while in Shanghai, metal for June rose 0.6 per cent to US$7,081 a ton.

New-home prices dropped in fewer Chinese cities in March from February, slipping in 49 of the 70 cities tracked by the government, data showed Saturday. China last month eased home- buying rules to revive a slumping property market that's weighed on economic growth. The real estate sector accounts for half of China's copper usage, Goldman Sachs estimates.

Also on the LME, aluminum, nickel and tin rose.