Copper gained on Tuesday boosted by supply concerns and as markets awaited economic data from the world’s largest economy, the United States, yet some wondered if copper prices have climbed too far too fast, given still-scant signs of demand from China.
Three-month copper on the London Metal Exchange traded at $9,470 a tonne at 1317 GMT, compared with a close of $9,455 on Monday. The metal used in power and construction rallied to a two-month peak of $9,520.25 the prior session, but remains still some 7 percent from a record seen in February.
“(A price recovery) seems to me a little bit early. We’ve got all of these problems around the macro market... and I don’t think the evidence of Chinese demand picking up is strong enough yet,” analyst Stephen Briggs of BNP Paribas said.
“Sentiment a couple of weeks ago was quite poor...this is a relief rally,” he added.
A pick up in demand for risky assets from last week softened a bit on some speculation about a possible rate rise in China this weekend, as well as a Moody’s report saying the scale of problem loans at local governments in China may be much bigger than previously thought.
Expectations that appetite from top consumer China will improve alongside European and US industry after summer — against a backdrop of constricted supply — has fed predictions that copper will print new records later this year.
BNP Paribas sees copper hitting a record near $11,000 in the second half.
But so far, Chinese consumers do not appear to be making major buys. LME copper stocks have fallen by some 12,000 tonnes to two-month lows, but the latest inventories data from the Shanghai Futures Exchange showed that stocks jumped by more than 9,000 tonnes on the week.
“Backwardation in the (Shanghai) market has all but disappeared following last week’s stock increase. This is a sign that the buying has dropped as prices have risen too fast for some,” broker Triland said in a note.
Elsewhere, the euro retreated against the dollar and the Swiss franc on Tuesday as soft euro zone data and concerns over the health of the Chinese economy pushed investors away from riskier currencies back towards those perceived to offer safety.
“Overall we would watch the dollar closely if it continues to rebound then we would expect that to produce a headwind for the metals,” FastMarkets said in a note.
SUPPLY PIPELINE
The copper supply pipeline, which is at risk of severe disruptions, was highlighted again on Tuesday, with weather and strike issues in the world’s top copper producer, Chile, overnight.
Heavy snow and winds severely affected output at Chile’s Collahuasi, the world’s No. 3 copper mine, the head of its main union said. The mine operator said it had no figures on any impact, however.
“This is a fairly important mine,” Danske bank analyst Christin Tuxen said. “That could certainly be one of the reasons (pushing up copper prices).”
Meanwhile, state-run Codelco sought to avert a 24-hour strike by workers demanding a bigger say in its restructuring. ⅛IDnN1E76310A⅜ This comes on the heels of a seven-day strike at Freeport-McMoran Copper & Gold Inc’s Indonesian unit.
But this was not enough to stimulate action from industry, a trader said. “Talking to the industry they have got nothing to do or they are all on holiday,” said one LME trader. “Personally I don’t see any steam in the copper bounce.”
In other metals, battery material lead was at $2,688 from $2,684. A trader said there had been a flurry of demand for high grade material in Europe.
Aluminium traded at $2,535 from $2,510. At the LME, traders noted that there was a large purchase of some 3,000 lots of the December 2013 contract last week. Stainless steel material nickel was at $23,281 from $23,175.
