BR: Copper near 3-week high; China data fuels gains
LONDON: London copper hit its highest in nearly three weeks on Monday, after Shanghai copper rallied to its highest in four months, spurred by tight supply and signs of improved growth in top copper consumer China.
The HSBC/Markit Flash China PMI showed China's factory sector activity expanded for the first time in six months in June, offering new signs the economy is stabilising thanks to Beijing's measures to shore up growth.
Also, London Metal Exchange (LME) inventories fell 850 tonnes to 158,575 a tonne, their lowest in nearly six years, while cash copper held on to its premium over the three month price, also indicating supply tightness.
"Copper is being supported by robust demand from China, tight stocks and a market deficit that wasn't expected by most observers. Growth of 7.5 pct is not weak for the world's second largest economy," said Commerzbank analyst Eugen Weinberg.
Three-month LME copper climbed 0.81 percent to $6,875.25 a tonne by 0946 GMT, after hitting $6,890 a tonne, its highest since June 3.
The most-traded August copper contract on the Shanghai Futures Exchange rallied 2.3 percent to 49,550 yuan ($8,000) a tonne. It had earlier climbed to 49,610 yuan a tonne, the strongest since Feb. 25.
China imported 282,969 tonnes of copper in May, up 21.89 percent versus a year ago, and bringing annual gains for the year to date to nearly 50 percent, China customs data showed earlier.
In the wider markets, the euro inched down after flash purchasing manager surveys from both Germany and France came in below expectations. But the trend remained the same - robust growth in Europe's biggest economy and a continuing struggle for some of its neighbours.
A weak euro makes dollar-priced metals costlier for European and other non-U.S. investors.
Also limiting gains in copper was the ongoing investigation into suspected fraud at a Chinese port, which has caused banks to take longer to approve loans for copper imports.
"Certainly China will reduce imports because of this financing issue and it will also take a longer time to get cleared," said Helen Lau, senior mining analyst at UOB-Kay Hian Securities in Hong Kong.
But suggesting further gains in the near term, ShFE and LME copper punched through their 200-day and 100-day moving averages respectively, a key buy signal for chart-following strategies.
The London Metal Exchange (LME) will keep its open-outcry trading ring following a review of its future, it said on Monday, bucking a trend by most other markets to shift to all-electronic operations.
LME zinc was up 0.61 percent at $2,190.25 a tonne, after hitting a 16-month peak of $2,193.50 earlier, while lead was up 1.64 percent at $2,165 a tonne, having hit its highest since late April at $2,169.
Credit Suisse said in a note that while it expects structural tightness in zinc is more likely to be a feature of the market in 2015, investors may anticipate supply losses later this year.
