Copper steady on China demand hopes

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CopperMine REUTERS

London - Copper was steady on Thursday as investors held firm in the belief that purchases from top consumer China will be strong when it returns from a week long holiday.

Three-month copper on the London Metal Exchange edged down 0.01 percent at $8,225 a tonne by 12:14 SA time, after ending the previous session down 0.1 percent.

Weighing on the metal, the dollar rose versus the euro after data showed euro zone slipped far deeper than expected into recession in the fourth quarter as Europe's two largest economies, Germany and France, both shrank markedly at the end of the year.

A strong dollar makes dollar-priced metals costly for European investors.

Of particular concern, the German economy, Europe's largest, contracted by 0.6 percent in the final quarter of 2012.

The figures suggested the euro zone could remain slumped in recession in the first quarter of this year.

But investors kept their focus firmly on China, where data last week showed exports and imports surged and new lending soared in January, signalling not only a solid recovery in domestic and overseas demand, but also risks that inflationary pressures are building.

“There's a feeling that the importance of China is much greater than Europe and prospects there have been improving for some time. Also GDP data is somewhat backward looking, more recent PMI data for almost all regions was more encouraging,” said Ross Strachan, analyst at Capital Economics.

But he added: “Our expectations is for prices to be broadly around current levels over coming months because its got to that stage where a lot of the improved macro data has been effectively priced in.”

Copper hit a 4-month high of $8,346 a tonne on February 4, but has since struggled to find momentum with the Shanghai Futures Exchange closed this week.

However, prices are up almost 4 percent so far this year.

Volumes were slowly recovering from extremely low levels seen at the start of the week as some Asian nations returned from holidays. But China, which accounts for 40 percent of global copper demand, will only resume trading next week.

“Markets are expecting China to restock, so copper prices will probably see a slight pick up after the Lunar New Year,” Natalie Robertson of ANZ in Melbourne said, but added there could be some choppiness ahead of the G20 meet this weekend.

“European GDP is also due today, so I think it will be macro driven for the next few days until China re-enters the market,” she said.

ALUMINIUM HOLDS NEAR 6-WEEK TOP

Aluminium prices held near a six-week high hit on Wednesday. Chart-based buying has improved the metal's technical picture, RBC Capital said in a note.

“Aluminium's next target will be the January high where a break and close above would set up a test of $2,200,” it said.

LME aluminium, which hit a 3-1/2 month peak of $2,184 on Jan. 3, was trading up 0.65 percent at $2,155.

China's state-owned CITIC Group has bought a $452 million ($467 million) stake in Australia's Alumina Ltd AWC.AX, giving it an interest in the world's largest alumina business at a time when China has grown more dependent on alumina imports.

China's imports of the material used to make aluminium jumped by 165 percent last year in part due to uncertainty over Indonesian supply of bauxite, the raw material for alumina.

Soldering metal tin fell 0.08 percent to $24,930 a tonne, while zinc, used in galvanising rose 0.13 percent to $2,197.75.

Battery material lead rose 0.22 percent to $2,410.25 a tonne, while stainless-steel ingredient nickel rose 0.10 percent to $18,378. - Reuters


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