Reuters reported that copper rose on buying interest from Asia and arbitrage trading but gains were limited as fears of a slower economic recovery which may dent metals demand growth, dampened market sentiment.
Benchmark copper on the London Metal Exchange was up 0.5% at USD 8,878 per tonne from USD 8,830 when it hit its lowest in a week at USD 8,751. The metal used in power and construction has fallen around 13% from the record high USD 10,190 per tonne it hit on February 15th 2011.
Mr Steve Hardcastle head of metals trading at Sucden Financial said that "There are pockets of physical buying but it's price based it's not full restocking. There is a certain amount of short covering taking place in Shanghai and the arbitrage window has been there or there about for the last 2 days LME buying, Shanghai selling."
Traders have said that if the arbitrage which opened earlier this month holds at current levels of around CNY 400 it could encourage increased refined copper imports into China in the next few months.
Credit Suisse said that Chinese copper prices are outperforming LME prices which would incentivize Chinese consumers to step up imports. Based on our view that the economy should recover moving along H2 2011 we think the current price weakness across metals offers entry opportunities.
China accounts for nearly 40% of total copper demand and the market has been anxiously waiting for it to start buying again after a lengthy period of destocking. A softer dollar also supported industrial metals. A weak US currency makes dollar priced commodities more affordable for holders of other currencies.
