SINGAPORE, Mar 22: London copper rose on Friday on signs of resurfacing Chinese demand and a US recovery, but worries over a Cypriot default and a deepening economic malaise in the euro zone put the metal on track for its biggest weekly loss in a month.
Copper prices fell to seven-month lows this week, triggering some restocking by Chinese consumers, but concerns over euro zone contagion have eclipsed signs of improving demand, both from top consumer China and through a nascent recovery in the U.S. Housing market.
Three-month copper on the London Metal Exchange rose 0.79 percent to $7,633.75 a tonne by 0249 GMT, reversing losses from the previous session, when it fell half a percent.
Copper prices are headed for a drop of 1.5 percent this week, in the biggest decline since late February. Prices are recovering from a seven-month trough at $7,486.25 a tonne hit on Tuesday, but are still down more than three percent on the year.
The most-traded July copper contract on the Shanghai Futures Exchange fell 0.46 percent to 55,770 yuan ($9,000) a tonne.
‘The right outlook for copper is neutral to bearish, while the market focuses on what is happening in Europe. I still think we’re still going sideways,’ Jonathan Barratt, chief executive of Barratt’s Bulletin, a Sydney-based commodity research firm.
‘A pick-up in prices will be led by an improvement in demand. If we’re not seeing draws in copper inventories but we’re seeing builds, then it’s fairly apparent people aren’t making the orders they need to for a resumption in demand in the second and third quarters,’ he added.
The European Union gave Cyprus till Monday to raise the billions of euros it needs to secure an international bailout or face a collapse of its financial system that could push it out of the euro currency zone.
Economic malaise in the euro zone deepened in March even before Cyprus ran into debt trouble, but manufacturing in the United States and China improved, surveys showed on Thursday.
A clutch of data pointed to growing momentum in the US economy during the first quarter, with jobless claims trending lower and factory activity and homes sales both on the rise.
‘With fundamentals weak, any Q2 pick-up will be short-lived and we advise investors to be prepared to trade price rallies from the short side…Be prepared to…Sell base metals on any significant rally,’ Barclays said in a note.
TEN YEAR PEAK
LME copper stocks have climbed to their highest in nearly ten years, latest LME data showed, rising by 6,625 tonnes to 557,450 tonnes, which is the highest since October 2003.
LME inventories have more than doubled since the start of December, in part because Chinese smelters have exported more of their record domestic stockpiles, helped by a change last year in export rules.
China exported 64,781 tonnes of copper in the first two months of this year, almost a quarter of last year’s total. Exports in 2012 grew 75 percent from the year before. (agencies)
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