SG:London copper heads for gains in May after 3 month drop
Reuters reported that London copper futures were little changed as investors adopted caution ahead of a key factory activity report in top consumer China but are still on track to end May higher after a three month slide.
But news of a fresh tunnel collapse on Friday at the world's second largest copper mine, in Indonesia, may spur supply concerns and help lift prices later in the global session.
China's official Purchasing Managers' Index due out on Saturday is likely to show manufacturing activity barely expanded in May. An initial private sector PMI survey last week showed a contraction for the first time in seven months, fueling a sell off in commodities and equities.
While prices rebounded this month from the year's lows in April, backed by supply outages and signs of firm demand in top consumer China, a rally has eluded copper amid persistent doubts on the outlook for the global economy.
Mr Sijin Cheng commodities analyst at Barclays Capital said that "For a lot of investors, the fundamentals of copper are still not compelling enough to give it a rally that's sustainable. People are still trading it as a reflection of their take on the macroeconomic environment which has been very confusing lately."
While the recent flash HSBC PMI for China suggested that its recovery could stall, US data has pointed to an economy that has held up reasonably well but still faces headwinds that could convince the Federal Reserve not to trim its monetary stimulus in the immediate future.
Three month copper on the London Metal Exchange was nearly steady at USD 7,312.25 per tonne by 0704 GMT. The metal has gained almost 4% for the month.
Freeport said it had resumed some operations at the mine. The suspension of work following the first accident had helped lift copper to a 6 week high of USD 7,533.75 per tonne last week.
Also providing support to copper prices is the tighter supply of scrap copper in China which could boost the country's imports of refined copper. The scrap shortage pushed copper premiums to 8 month highs of about CNY 500 per tonne last week.
The premium, or the gap between spot prices of refined copper and the front month contract on the Shanghai Futures Exchange, last stood at about CNY 200.
