METALS-Copper hits 17-month peak on US-China trade deal optimism

By Pratima Desai

LONDON, Oct 27 (Reuters) - Copper prices hit 17-month highs on Monday as signs of easing trade tensions between the world's two largest economies - China and the U.S. - and hopes for stronger growth and demand spurred buying.

Benchmark copper CMCU3 on the London Metal Exchange was up 0.6% at $11,028 a metric ton at 1702 GMT after earlier touching $11,094 a ton, the highest since May 20 last year.

Chinese and U.S. officials have thrashed out the framework of a trade deal for President Donald Trump and Chinese leader Xi Jinping to decide on later this week, which would pause more onerous U.S. tariffs and Chinese rare earths export controls.

Metal traders said China's industrial profits growing at their fastest pace in nearly two years in September suggested that growth in the top consumer of industrial metals may be gaining momentum.

Helping sentiment in metals markets was a weaker dollar against the yuan CNY=PBOC, which made dollar-priced commodities cheaper for Chinese buyers.

However, the Yangshan copper premium SMM-CUYP-CN, a gauge of China's appetite for importing copper, has shrunk to $38 a ton from $58 a ton in late September and $100 in May, indicating purchases have yet to pick up pace.

Expectations the U.S. Federal Reserve will cut interest rates this week are weighing on the dollar and could potentially provide a demand boost for base metals.

Elsewhere, the focus was on declining zinc stocks in LME-approved warehouses MZNSTX-TOTAL at 37,050 tons, the lowest since March 2023 and down more than 80% since the middle of April.

StoneX analyst Natalie Scott-Gray said LME zinc stocks have been "feeding real-world demand" due to tight supplies globally.

"Units are also being drawn into the U.S., with concerns that the outcome of the Section 232 investigation into Critical Minerals (launched in April) could result in import tariffs on zinc," Scott-Gray said.

Worries about supplies on the LME market pushed the premium for the cash zinc contract over the three-month forward MZN0-3 to a record high $338.74 a ton. It was last around $250 a ton.

Three-month zinc CMZN3 was up 1% at $3,055 a ton, aluminium CMAL3 was up 0.6% to $2,876, lead CMPB3 advanced 0.4% to $2,025, tin CMSN3 climbed 0.8% to $36,095 and nickel CMNI3 slipped 0.5% to $15,280.