MELBOURNE, Feb 25: London copper slipped on Wednesday from a six-week high hit the session before, as China returned from a week-long holiday and resumed selling on the prospect of ample local metal supply. Activity in China’s mammoth factory sector edged to a four-month high in February but export orders shrank at their fastest rate in 20 months, a private survey showed, painting a murky outlook that could boost the case for more policy support.
‘What we need from China is just an expectation that it won’t fall off a cliff. Then I think copper will go OK,’ said analyst Dominic Schnider of UBS Wealth Management in Hong Kong.
‘While there’s still room for a drop near term, (mine) supply challenges are clearly for the minute giving a bit of a floor.’
China’s domestic copper supply has improved as local copper producers have ramped up output in the past few months, while exchange stocks in China and on the London Metal Exchange have jumped this year. But miners have cut production forecasts in part due to accidents and declining ore grades.
Three-month copper on the London Metal Exchange edged off early lows after the China data to trade at $5,753.50 a tonne at 0310 GMT. That is still down 0.5 percent, eroding a 2-percent gain from the previous session, when the contract hit its highest since Jan. 13 at $5,846 a tonne. Copper prices had climbed on renewed expectations U.S. monetary policy would stay loose for longer after comments by Fed Chair Janet Yellen.
The most-traded May copper contract on the Shanghai Futures Exchange traded flat at 42,090 yuan ($6,724) a tonne. ‘Mine supply is, we believe, likely to significantly underwhelm in 2015, just as it (did) in 2014,’ said Citi in a research note.
‘We expect increasing supply problems to be highly supportive of copper prices in the second half of the year, and continue to target a return to $7,000/t levels before year-end.’
Helping boost risk appetite, Greece secured a four-month extension of its financial rescue on Tuesday. Across other metals, Shanghai zinc and lead fell 2 percent or more at the open, playing catch up with moves in London, before also cutting losses. Russia’s United Company Rusal Plc reported a more than six-fold rise in fourth-quarter earnings due to a slump in the rouble against the dollar and stronger aluminium prices, and forecast a 1.1 million tonne deficit in aluminium supply in 2015 outside China.
(AGENCIES)
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