WSJ:BASE METALS:LME Metals Higher In Asia; Mkt Awaits China Policy Move
SINGAPORE (Dow Jones)--London Metal Exchange base metals were mostly higher in Asian trading Tuesday but gains were limited with the market unsure if China will announce further credit tightening measures after output data earlier in the day showed Chinese growth continues to be robust.
Three-month copper was trading at $8,992 a metric ton at 0725 GMT Tuesday, up $80 from its previous settlement.
Copper fell briefly in early trading after Chinese data showed the country's consumer price index rose 5.5% in May, the highest level since July 2008 and up from April's 5.3% rise. But the number was in line with market expectations, as was the industrial output data which showed a 13.3% expansion in May.
Copper had a "knee jerk reaction" to the news, a Hong Kong-based trader said, as traders pared positions on fears about the possibility of further tightening in Chinese monetary policy.
Any fresh move by the Chinese government to tighten policy and enforce more stringent credit conditions will be poorly received by metals market participants and could spark more selling, the trader said. Tighter credit could slow growth in the construction and infrastructure sectors and reduce the demand for metals including copper.
But the market has already been expecting an interest rate hike for several weeks now with some of that bearishness already being factored into current prices.
"I hope (any new) measures will not be too severe," said the Hong Kong-based trader, adding he expects prices to move in a narrow range for the rest of the day due to conflicting views about potential market direction, going forward.
"I think the market will remain steady," he said, adding however, that market needs more bullish fundamental news to push copper prices it back above $9,000/ton.
Some participants are waiting for a series of U.S data due later in the day, including retail and auto sales as well as producer prices, for further direction.
Tuesday also saw the release of May copper output figures from China, which showed production rose 10% from a year earlier to 439,000 tons. Output was down 3.3% from April, according to the data from China's National Bureau of Statistics.
China's rising domestic production and the lower-than-expected May imports announced last week are hampering sentiment in the market, a trader in Singapore said.
Preliminary data from China's Customs Department showed May imports fell 3% on-month and 36% on-year to 254,738 tons. January-May imports fell 25% to 1.42 million tons.
"People have been looking at this data and thinking there's lots of copper about, but the reality is that a lot of copper that is already in bonded warehouses is being used," he said, adding that he expects June import data to show higher imports. "We are going to see better consumption."
Monday's warehouse stock data from the LME suggests nearby copper demand in Asian markets is improving. Copper inventories dropped by a net 2,175 tons to 475,750 tons, with most of the drawdown registered in Busan, South Korea.
Tin also saw a recovery late in the Asian day, after falling as much as 1.17% to $24,510/ton earlier in the day.
The supply squeeze that helped pushed the contract to a record high of $33,600/ton April 11 is easing, Societe Generale analyst David Wilson said in a note Monday.
"The most obvious signal of a lack of supply constraints has been the almost constant rise in London Metal Exchange tin stocks since early October last year," Wilson said. Tin stocks totaled 22,075 metric tons Monday, compared with 12,495 tons at the start of October.
The following are LME three-month base metals prices at 0730 GMT and the changes from the previous PM kerb:
