Copper edges up

Copper edges up
Copper edges up

September 27, 2013

Copper edged higher on Thursday, supported by improving demand in top consumer China, but renewed worries over the US fiscal outlook and federal debt kept gains in check. Benchmark copper on the London Metal Exchange closed at $7,251 a tonne, up from a last bid of $7,193 on Wednesday. Prices of the metal have been trapped in a $7,000 to $7,500 range for the past month, down about 9 percent for the year.

Strong seasonal demand in China is providing support to prices while uncertainty over the US fiscal outlook is deterring companies from placing new orders and draining liquidity from the market. Reflecting optimism about demand for the metal, leading copper producer Codelco will seek a significant rise in 2014 copper premiums, mostly because of renewed strong demand from China.

Investors were also cautious ahead of the National Day holiday, which will keep Chinese markets closed next week. “Sentiment should be improving, but the market is hesitant to make any sharp move in any direction ahead of the long Chinese holiday next week … All the signs we are seeing suggest that the economic situation in China is steadily improving,” said Nic Brown, head of commodities research at Natixis.

“We continue to like copper. We think that by the end of next year we might have the beginning of a small surplus, but for now this is a market in deficit and prices don’t seem to be reflecting that.” Strengthening confidence in the prospects for economic improvement in China, preliminary data this week showed that its factory sector grew at its fastest pace in six months in September.

China accounts for about 40 percent of global copper consumption. “For some end uses, like electrical wire and consumer goods, demand is picking up seasonally because factories have started producing for Christmas holidays,” said Chunlan Li, an analyst at the CRU consultancy in Beijing. “But overall demand is stable … and supply is increasing at a steady pace. I expect prices to stay stable ahead of LME week as people wait to see what happens there,” she added, referring to a industry gathering in London next month.

Benchmark prices of stainless steel ingredient nickel ended at $13,830, from $13,825 on Wednesday. The price of nickel, the worst LME performer this year, is down almost 20 percent since the start of the year. Reflecting tough conditions for the nickel market, Keywell LCC, a Chicago-based metals recycler, has filed for Chapter 11 bankruptcy protection.

The company blamed weak nickel prices and poor stainless steel demand, according to a court filing that outlined plans to sell the company to a larger rival. In other metals, aluminium, untraded at the close, was last bid at $1,822 from $1,804 on Wednesday. Zinc ended at $1,898 from $1,886, lead closed at $2,096.50 from $2,076 and tin ended at $23,225 from a close of $23,175. Courtesy  Reuters

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