London - Copper prices rebounded on Tuesday on hopes that the outlook for growth and demand from top consumer China would improve in coming months, prompting some short covering activity following hefty falls in the previous session.
Three-month copper on the London Metal Exchange rose to $7,274 a tonne by 11:51 SA time, up 1 percent from Monday's close of $7,202, when it fell intraday to its lowest for 1-1/2 years.
Commodity markets slumped on Monday after data showed China's economic recovery unexpectedly stumbled in the first three months of 2013.
“You may not see a clear improvement in economic numbers in China for the next two or three months but if you look at physical premiums for copper in Shanghai and falling stockpiles, these are indicators that things are getting better,” said Nic Brown, head of commodity research at Natixis.
Copper stocks in bonded warehouses in Shanghai have fallen by about a fifth in the past month fanning hopes that Chinese importers will resume fresh orders soon.
“We don't think end user demand is that bad at the moment. We could expect that as growth finally does pick up later in the year (in China) that we will see stronger prices for base metals,” Brown said.
China is the world's biggest copper consumer, accounting for about 40 percent of global demand.
Also supporting prices was a rise in the euro against the US dollar.
A weak dollar makes commodities priced in the US unit cheaper for holders of other currencies.
In other commodity markets, gold prices regained ground after its biggest fall on record, while Brent crude prices sank below $100 for the first time in nine months.
Copper is trading 8.1 percent lower in the year to date.
BUYING ON DIPS
Traders said consumers would start purchases on dips below $7,100 a tonne, while Chinese buyers have shown modest interest.
“After weakness initially, we have seen short-covering through $7,185 and $7,230. We are now looking at the $7,280 area for a break or pull-back,” said a trader in Hong Kong.
Reflecting a market in plentiful supply, little price support came from news that Rio Tinto's Kennecott copper mine in Utah, the second-biggest source of copper in the United States, would see a drop in refined metal output by about 100,000 after a cave-in last Wednesday.
Other metals also recovered from multi-month lows hit in the previous session.
Soldering metal tin rose to $21,400 from $21,050 on Monday while zinc, used in galvanising, climbed to $1,893 from $1,869.
Battery material lead rose to $2,052 from $2,033, aluminium climbed to $1,894.50 from $1,866, and stainless steel ingredient nickel was at $15,703 from $15,695. - Reuters