SINGAPORE, July 26: London copper futures hovered above $7,000 a tonne on Friday and were heading for their third weekly increase in four, although concerns over a dimming outlook for demand in top consumer China may cap further price rises.
Copper hit a one-month high of $7,119 on Wednesday as upbeat U.S. And European data helped counter more signs of weakness in the Chinese economy, where a preliminary reading this week showed manufacturing activity hitting an 11-month low.
China consumes about 40 percent of the world’s refined copper, and analysts cautioned further gains many be limited.
‘Slowing growth in China is still likely to put greater pressure on copper prices than the temporary support from good economic data in the west,’ said Joyce Liu, investment analyst at Phillip Futures.
Three-month copper on the London Metal Exchange was off 0.1 percent at $7,003 a tonne by 0310 GMT. The contract is up 1.2 percent so far this week.
Copper and other commodities including oil and gold also won support from a softer greenback, which makes dollar-priced assets cheaper for buyers using other currencies.
The most-traded November copper contract on the Shanghai Futures Exchange was little changed at 50,370 yuan ($8,200) a tonne.
Data this week showed firmer U.S. Business spending plans, while U.S. Home sales hit a five-year high. Private industry activity in the euro zone also expanded for the first time in more than a year.
The upbeat U.S. Data, however, suggests the Federal Reserve may start curbing monetary stimulus as early as September, and the potential for less liquidity may hurt commodities including copper. The Federal Reserve holds a policy meeting next week.
‘Indeed, if the liquidity and credit brakes are applied too hard in the U.S. And China then there is a danger of the global economy weakening again,’ Sucden Financial cautioned in its quarterly metals report.
‘We see little reason to be bullish on copper in the near term, but feel that policymakers will have to prompt stronger growth later in the year that may lead to some restocking.’
In China, the central government has ordered metal smelters to close outdated capacity by the end of September and dismantle it by the end of this year.
Beijing has set yearly plans to close outdated capacity since 2009 as part of efforts to cut energy consumption and emissions, but the closing deadline has been brought forward from earlier years. The government is becoming more serious about tackling overcapacity.
(agencies)
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