Copper snaps 6 days of losses

Published Feb 25, 2013

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London - Copper edged higher on Monday after a six-day losing streak, helped by a weaker dollar, although slower growth of

manufacturing activity in top consumer China, where post-holiday buying has yet to emerge, kept a cap on gains.

China's HSBC flash purchasing managers' index (PMI) for February slipped to a four-month low of 50.4 from January's final reading of 52.3.

The flash PMI still indicated a fourth consecutive month of expansion.

In addition, trade data showed copper imports into China, which consumes about 40 percent of the world's copper, reached just 243,174 tonnes in January, down 27.51 percent from a year ago.

Copper remained in positive territory, however, as traders saw fair value in the price following last week's sharp correction, and as a weaker dollar made dollar-priced metals cheaper for non-US investors.

Three-month copper on the London Metal Exchange had risen 0.49 percent to $7,844 a tonne by 11:45 SA time, after posting a weekly loss of nearly 5 percent last week, its sharpest since mid-December, 2011.

The most-traded copper contract on the Shanghai Futures Exchange dropped to a two-month low of 57,090 yuan earlier.

“The pullback we've seen is a realignment of prices to where fundamentals are but we are moving into a period where demand should start to pick up.

A lot of factories in China are still closed. Some will start opening this week,” said Barclays Capital analyst Gayle Berry.

She added, however, that the market balance this year was a small surplus so any upside that could come over the next month from stronger demand would be capped by that better supply.

Having pushed copper to a four-month high earlier this year, investors are now growing nervous again over euro zone debt pending an election in Italy, and about US monetary policy and budget woes.

Testimony on Tuesday from US Fed Chairman Ben Bernanke may offer investors clues about when the Fed intends to rein in its ultra-loose monetary policy, but they still have to contend with the looming fiscal cliff.

In a replay of tensions seen at the end of last year, the world's top economy faces automatic spending cuts in most government programmes on March 1 if Washington can't come up with a budget deal.

HOPES STILL PINNED ON CHINA

Traders expect physical purchases to pick up from this week as China's manufacturing sector returns to work after the Lunar New Year break.

However, the seasonal upturn in demand may not necessarily push prices much higher.

“Copper has lost its appeal as one of the most important commodities in China's urbanisation process, as the government no longer sees property development as the core of urbanisation,” said Zhu Bin, an analyst at Nanhua

Futures in the eastern Chinese city of Hangzhou.

Zhu expected copper to return to $7,500, last November's low.

Shanghai's spot copper traded at an average discount of 140 yuan to London prices, even though the period after the Lunar New Year holiday is typically a busy season for the copper market.

Supporting sentiment, BlackRock Inc. has won approval from the US securities regulator to list and trade its copper exchange-traded fund.

This suggests extra demand for physical copper.

In other metals traded, aluminium fell 0.72 percent to $2,033.25 a tonne, having dropped to its lowest since mid-January earlier at $2,029.25 a tonne under pressure from increasing output in China and continued technical selling.

Soldering metal tin rose 0.41 percent to $23,200 a tonne, zinc, used in galvanising fell 0.31 percent to $2,081.25 a tonne, battery

material lead was flat at $2,304 a tonne, while stainless-steel ingredient nickel fell 0.66 percent to $16,835 a tonne. - Reuters

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