Copper was steady on Wednesday as signs of slowing factory activity in China and Europe constrained prices and attention turned to pending U.S. figures, while a weak dollar against the euro cushioned prices.
Three-month copper on the London Metal Exchange traded at 9,210.25 at 11:59 SA time from a close of $9,220 a tonne on Tuesday.
The metal used in power and construction hit its highest in four weeks on Tuesday at $9,278.50 a tonne as it recovers from a commodity-wide route in late May, caused by concerns over a global economic growth slowdown.
“The fact that we're a little bit weaker is a reflection of the weaker PMIs which have ignited people's concerns about a slowdown in activity in China,” said analyst Gayle Berry of Barclays Capital.
“They were above expectations so the general feeling is that you'll get another rate hike in June, so that is also making the market a bit nervous,” she said, adding that the figures were supportive of metal demand.
Chinese factories expanded in May at their lowest pace in at least nine months, two surveys showed on Wednesday, reinforcing evidence that the economy is slowing under the weight of government credit curbs and power shortages.
China is the world's top consumer of base metals.
“We're moving from what was a period of very fast expansion in 2010 as economies went into recovery, into a more mature phase where you'd expect to see rates of expansion slow. You need... perspective when looking at these numbers,” added Berry.
Sentiment was also tarnished by fresh signs of decline among factories in the euro zone.
Also the softer dollar was providing a cushion for prices, said a London trader who expects muted trade in Europe this week with many nations off on holiday on Thursday.
Thursday is the Ascention day holiday in most parts of Europe which may also pare back liquidity for Friday when the closely watched U.S. non-farm rolls figures for May are due.
RISING COPPER
Later this session U.S. ADP jobs data are due at 14:15 SA time while the Institute for Supply Management releases its May manufacturing index and Commerce Dept releases April construction spending at 16:00 SA time.
“If the (PMI)numbers disappoint, we think pullbacks could offer buying opportunities since we expect activity to reaccelerate moving into Q3. We favour copper and aluminium,” Credit Suisse private banking said in a note.
Copper stocks rose by 3,075 tonnes net, the latest LME data showed, taking total stockpiles above 470,000 tonnes for the first time in a year, and highlighting the lack of demand in what is usually a peak season.
Power intensive to produce, aluminium continues to find support from news earlier this week that China will raise power tarriffs for some consumers. It traded at $2,682 from $2,677 having hit its highest since early May on Tuesday.
“Concerns have been raised recently about Chinese aluminium production coming under pressure as the country seeks to limit power hungry industries and yet production has reached record levels,” said RBC Capital in a Tuesday note.
“Small wonder then that the technical buying has been met with producer selling interest.”
Tin was at $27,850 from $27,940 while zinc, used in galvanising was at $2,267 from $2,266 on Tuesday's close. Battery material lead was at $2,520 from $2,521 and nickel was at $23,420 from $23,590.
Stainless steel maker Outokumpu said it will sell its entire stake in miner Talvivaara to bolster its financial health. Outokumpu said it has sold its 4.3 percent holding in Talvivaara Mining Company to the Finnish state's investment arm. - Reuters