SINGAPORE, June 14: London copper climbed on Friday as some traders covered short positions, but remained on track to close down for a second straight week on worries over tepid Chinese demand growth and an early end to easy monetary policy by global central banks.
While a disruption in supply from the world’s No.2 copper mine in Indonesia supported sentiment, it is the bleak global demand outlook that has been dragging on prices of the metal, which dropped to a six-week low on Thursday.
‘Recently, China’s economic data has not been very good. Also, there may be lower seasonal demand from late June for the copper tube sector when there is less buying from air conditioner manufacturers due to the weather,’ said Chunlan Li at metals consultancy CRU in Beijing.
For now, copper prices may be drawing support from a drop in bonded stocks in China. China is the world’s top copper consumer, accounting for 40 percent of refined demand.
Three-month copper on the London Metal Exchange rose 0.97 percent to $7,118.25 a tonne by 0253 GMT, after dropping to the lowest since May 3 at $7,011.25 on Thursday. Copper is down around 10 percent for the year.
The most-traded October copper contract on the Shanghai Futures Exchange slipped by 0.41 percent to 51,460 yuan ($8,400) a tonne.
Investors remain jittery over uncertainty on whether the US Federal Reserve will scale back its massive stimulus, which has been the main source of rallies in riskier assets, at next week’s policy meeting.
In signs of economic resilience, US retail sales rose more than expected in May and first-time applications for unemployment benefits fell last week.
CHINA BONDED STOCKS, SUPPLY
China’s bonded copper inventory has dropped below 500,000 tonnes, driven by still steady seasonal demand and amid thin supply of feedstock scrap, Li said. Bonded stocks were above 1 million tonnes in late January.
New foreign exchange regulation has also driven imports to the domestic market, by curtailing the number of companies who can hold copper in bond, Li said.
‘Bonded stocks are likely to still fall a little further, but not much,’ she said.
Copper held in China’s bonded areas is one of the world’s biggest stockpiles of the metal, and falling inventories could underpin copper prices.
Premiums for bonded metal in Shanghai’s Yangshan port rose to $150-$160 on top of LME cash prices on Friday, according to China price provider SMM, up $10 from the end of May.
Supply concerns also supported copper, with operations at the Grasberg mine in Indonesia shut for the past month after a deadly tunnel collapse.
Trade union workers at the Freeport McMoRan Copper and Gold Inc mine have called off a planned strike due to start on Friday, a company spokeswoman said.
(agencies)
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