SINGAPORE, July 5: London copper eased on Friday ahead of a crucial U.S. Labour report, but was set to log its biggest weekly gain in two months as a shortfall in Chinese supply and technical buying supported prices.
Copper prices have rebounded by 4 percent from three-year lows hit in late June, but with near-term tightness in top metals consumer China starting to ease and peak second-quarter demand waning, traders expect the recovery to peter out.
‘China’s economic picture still faces challenges going into the second half of this year,’ said analyst Judy Zhu of Standard Chartered in Shanghai.
‘Unless we see (policy-related) surprises from China, then the trend for copper prices will be progressively lower.’
Three-month copper on the London Metal Exchange fell 1.2 percent to $6,870 a tonne by 0300 GMT, adding to small losses in the previous session.
But copper prices are heading for gains of nearly 2 percent this week, the largest weekly rise since May 3 when it gained 3.4 percent.
The most-traded November copper contract on the Shanghai Futures Exchange edged down 1.3 percent to 49,570 yuan ($8,100) a tonne.
Last month’s cash crunch in China fuelled demand for copper imports to be sold into the domestic market to raise capital.
China’s copper importers are being forced by bottlenecks
At London Metal Exchange’s warehousing system to queue up for deliveries of metal they have already bought, resulting in spot copper import premiums rising by a third since mid-June.
Premiums for copper held in China’s bonded areas have eased this week to around $185 from as high as $210 a week ago, according to price provider SMM.
(http://www.Smm.Cn/yangshan/index.Php)
Signalling more metal is available in China’s domestic market, local prices for physical metal have fallen to a discount against front-month ShFE futures prices this week, having traded mostly at a premium since March.
Adding to a bearish undertone for metals, data showed investors sold out of commodity exchange-traded products (ETPs) in June after the U.S. Federal Reserve signalled it would wind down its economic stimulus programme.
(AGENCIES)
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