SINGAPORE, Jan 21: London copper edged up on Monday after economic growth in top metals consumer China picked up speed in the fourth quarter, although annual growth slowed to its lowest since 1999.
A tepid recovery in Chinese consumption has underpinned copper so far this year but analysts expect slow trading conditions in the first quarter until after China’s Lunar New Year holidays in February.
China accounts for around 40 percent of global refined copper consumption. A slowing Chinese economy has curbed demand for copper, flagging the end of a decade-long bull run which has also dented the allure of the metal for investors.
‘The market rallied on Friday because of the improving data from China,’ said Singapore-based analyst Bonnie Liu of Macquarie.
‘We’re coming into Lunar New Year. I think consumers were hurt last year when they restocked but faced little demand, so they are really cautious. That makes things really very quiet,’ she added.
China’s economy grew at its slowest pace in 13 years in 2012, though a year-end spurt supported by infrastructure spending and a jump in trade signalled the foundation for the stable growth path Beijing says is vital for economic reform may be in sight.
Three-month copper on the London Metal Exchange was supported at $8,068.75 a tonne by 0318 GMT, up 0.1 percent. It hit a one-week high of $8,130 a tonne in the previous session before closing the week more-or-less flat.
After strengthening to 2-1/2-month highs near $8,250 a tonne at the beginning of the year, copper prices have struggled to find momentum and last week touched a 2013 trough at $7,920 a tonne.
LME volumes were exceptionally low on Monday, with less than 1,500 combined lots turnover after two hours of trade.
The most-traded April copper contract on the Shanghai Futures Exchange slipped 0.21 percent to 58,260 yuan ($9,400) a tonne.
China’s Lunar New Year holiday begins Feb. 11 while markets will reopen on Feb. 18.
Also robbing metals of direction was a mixed view out of the United States, where consumer sentiment unexpectedly deteriorated in January, but where talks on resolving its debt ceiling appeared to be making progress.
Reflecting diminished appetite for metals from investors, hedge funds and money managers cut bullish bets in copper in the week to Jan. 15, Commodity Futures Trading Commission data showed on Friday.
‘We still like the base metals and are looking for higher prices in Q1, but we may have to wait until after the Chinese New Year holidays in February for a decent rally to materialise now,’ said RBC Capital in a research note.
LEAD TO OUTPERFORM
A severe cold snap in China over winter could fuel a resurgence in demand for lead, the top material used in the battery sector, said Deutsche Bank in a research note.
‘Meteorologists expect that China could continue to experience severe winter storms and freezing weather conditions over the next month,’ it said.
Extreme weather conditions generally weaken batteries and reduce battery life. The replacement battery sector accounts for 43 percent of global lead consumption, according to the bank.
‘We believe that the lead market could be one of the more attractive long opportunities this year. We would recommend buying on weakness,’ it said.
LME lead rose 0.13 percent to $2,304 a tonne, but remains down 1.5 percent on the year.
(AGENCIES)
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