RTRS:Copper inches higher, seen capped by economic worries
(Reuters) - Copper prices edged up from a one-week low hit in the previous session, but gains are expected to be capped by worries about the global economy and caution ahead of next week's holiday in top metals consumer China.
Uncertainty about bailout prospects for Greece and Spain, as the euro zone's three-year-long debt crisis rumbles on also weighed on investors' appetite for risk.
Three-month copper on the London Metal Exchange inched up 0.7 percent to $8,239.25 per metric ton by 0715 GMT, after dropping 1.2 percent in the previous session.
The most active January copper contract on the Shanghai Futures Exchange (ShFE) gained 0.2 percent to 59,180 yuan ($9,400) per metric ton after losing more than 1 percent on Monday.
"Investors are really biding their time and waiting for the next macroeconomic trading cue. China's September PMI was not great, but showed signs of stabilizing," said a Shanghai-based physical metals trader.
"If subsequent figures show that recent stimulus measures have started to work, this may prompt downstream consumers to restock their dwindling inventories. Until they start restocking, prices will just tread water."
ShFE data showed a 1,724-lot fall in net daily open interest by Tuesday's close, which, together with rising prices, suggested some short-covering during the session.
"Some shorts covered today. Chinese investors are closing down positions ahead of the holiday," said a Shanghai-based trader, referring to the Chinese national holiday which will see the ShFE shut from September 29 to October 7.
London copper is seen trading within a range of $8,150 to $8,400 a metric ton in the short term, traders said.
In addition to copper, physical demand for aluminum in top consumer China also remains sluggish, with major downstream industries, such as household electrical appliance makers, hit by a growth slowdown.
"In previous years, many companies restocked aluminum ingots before the Chinese National holiday since they worked throughout the holiday week. But this year, most of these companies said they were letting all their staff go on holiday," said Shanghai Metals Market analyst Zhang Chenguang.
In a sign of weak appetite for imports, premiums to import aluminum have fallen to $180 to $200 a metric ton from around $250 a month ago.
"Even at much lower premiums of around $200, no one is importing due to an unfavorable arbitrage," said the physical metals trader.
In a bid to help struggling smelters, China's Yunnan province will stockpile 300,000 metric tons of industrial metals, including aluminum, copper and zinc, from local producers under a plan that will also help smelters secure more bank loans.
The stockpiling plan will help remove some of the glut in the market and may lift domestic spot prices in the near term, analysts and traders said.
Across the wider economy, the euro zone remains a cause for worry for investors as German business sentiment dropped for a fifth straight month in September, raising fears of recession.
Uncertainties also surround Spain's finances as Madrid holds back from applying for a bailout for fear of a political backlash at home. This has doused the hopes of some investors that the highly indebted euro zone member would ask for a bailout at an EU summit on October 18-19.
