CNBC:LME copper inches up on China data, set to climb for 3rd day
SHANGHAI (Reuters) - London copper extended gains into a third session on Thursday, inching up on encouraging economic data from China, although concerns about low downstream demand, high prices and high inventories in the world's top metals consumer kept gains in check.
China's economy is finally regaining some traction, official and private sector factory surveys showed on Thursday, although they pointed to a sluggish recovery with the latter recording its 12th straight month of slowing growth.
The modest improvement nudged three-month copper on the London Metal Exchange up 0.6 percent to $7,805.75 per tonne by 0717 GMT, after rising 0.5 percent in the prior session.
The most active February copper contract on the Shanghai Futures Exchange ticked up 0.4 percent to close the session at 57,110 yuan ($9,200) per tonne.
Although the PMI data helped drive Shanghai equities 1.7 percent higher, traders said worries about sluggish downstream demand for copper reined in prices.
"Copper prices hardly moved today despite China's official PMI (results) ... and a surge in Shanghai equities, as Chinese downstream demand is still weak," said Orient Futures Derivatives director Andy Du.
Spot prices were last trading at a discount of up to 150 yuan to Shanghai Futures Exchange front-month futures prices, reflecting the lacklustre downstream appetite.
Traders said Chinese copper buyers have not been stocking up as most of them have not seen a sustained improvement in their order books, although some of the country's home appliance makers have reported stronger third-quarter profits on the back of a reviving property market.
"As long as spot prices are still trading at a discount to futures prices, risk appetite in copper will be limited. Downstream demand is increasingly the focus for base metals investors, such that they are even starting to disregard positive influences in equities," said Du.
An executive with a top copper tube and pipe maker in central China said his company still has not seen a pick-up in sales despite October being the start of the peak season.
"Orders have been slow since July. Our customers have been unwilling to stock up until they've got clearer policy signals after the 18th Communist Party Congress," he said, referring to China's once-in-a-decade leadership transition event scheduled to start on November 8.
Also, the modest lift in China's October factory activity numbers is not enough to trigger a resounding rise from current copper prices as "valuations are already relatively high", said Mizuho Corporate Bank in a client note on Thursday.
And given that current commodity prices have partly been boosted by speculation and stockpiling, copper prices may fall should demand stay sluggish, it added.
A report by the International Wrought Copper Council (IWCC) saying the global market for refined copper is expected to swing into a 281,000 tonne surplus in 2013 from a deficit this year, also dragged on prices.
In the wider economy, investors were cheered by financial markets reopening in the aftermath of Hurricane Sandy, with the New York Stock Exchange running on generator power.
But the euro zone debt crisis remained a cause for concern, with Greece revealing on Wednesday that it would overshoot its deficit and debt targets again next year because of a deeper than forecast recession.
Base metals prices at 0717 GMT
Metal Last Change Pct Move YTD pct chg
LME Cu 7805.75 46.25 +0.60 2.71
SHFE CU FUT FEB3 57110 250 +0.44 2.66
LME Alum 1916.00 10.00 +0.52 -5.15
SHFE AL FUT JAN3 15335 -05 -0.03 -3.19
HG COPPER DEC2 353.95 2.20 +0.63 3.01
LME Zinc 1869.00 -1.00 -0.05 1.30
SHFE ZN FUT JAN3 14840 25 +0.17 0.30
LME Nickel 16284.00 89.00 +0.55 -12.97
LME Lead 2075.00 12.00 +0.58 1.97
SHFE PB FUT 15280 30 +0.20 -0.07
LME Tin 20075.00 150.00 +0.75 4.56
LME/Shanghai arb -132
Shanghai and COMEX contracts show most active months
^ LME 3-m copper in yuan, including 17 pct VAT, minus SHFE third month
