MELBOURNE, Apr 1: London copper prices steadied on Wednesday after Chinese factory activity performed a fraction better than expected, while nickel plumbed new six-year lows as China nickel pig iron producers sold stocks to raise cash.
Activity in China’s factory sector unexpectedly picked up in March but remained weak.
‘That’s a very modest pickup – it doesn’t look like a robustly bullish signal,’ said analyst Daniel Morgan at UBS in Sydney.
‘We’re now in April, and this is really when we should have metals trade, processing and consumption all roll to life in China. And just marginally into expansion territory, that’s not a strong signal.’
The official Purchasing Managers’ Index (PMI), rose to 50.1 in March from February’s 49.9, stronger than 49.7 percent predicted by analysts. A private sector survey showed a contraction after two months of recovery. Three month copper on the London Metal Exchange (LME) was up 0.1 percent at $6,047.50 a tonne by 0148 GMT, after a small fall the session before.
The most-traded June copper contract on the Shanghai Futures Exchange which had dropped 1.6 percent, cut losses to 1 percent, at 43,320 yuan ($6,993) a tonne. LME nickel bounced 0.9 percent after earlier hitting six-year lows of $12,310, extending a 3.8-percent slump from Tuesday. The new Shanghai nickel contract slid 5 percent before cutting losses to 3.4 percent. Weak domestic demand and low prices have prompted producers of nickel pig iron in China to stop or curb production this month and sell their stocks for cash, industry sources in China said.
‘It looks distinctly as if some of the longs that have patiently been waiting for nickel to realise its well-documented bullish potential have decided to sell and realise some painful losses,’ broker Triland said. There was some evidence of physical demand supporting prices, with nickel premiums in China bond jumping $15 to $115 a tonne.
Indonesia’s ban on nickel ore exports last January was expected to strangle supply to China’s stainless steel mills, but weak demand has doused the bull story for now. Elsewhere, the Federal Reserve will have a ‘strong’ case to hike interest rates in June, a hawkish U.S. central bank official said on Tuesday, dismissing recently weak economic data as transitory and perhaps due to unseasonable weather. U.S. rate hikes will boost the dollar, making metals more expensive for holders of other currencies. (AGENCIES)
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