Tuesday, 24 March 2015 18:20
LONDON: Copper retreated from a 2-1/2 month high on concerns about Chinese demand after weak factory data in the top metals consumer and following a rise in inventories, but a weak dollar supported prices.
Three-month copper on the London Metal Exchange rose 0.1 percent to $ 6,127 a tonne by 1110 GMT after earlier hitting a high of $ 6,203.50, the loftiest since Jan. 5.
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LME prices pulled back after a private survey showed activity in China’s factory sector dipped to an 11-month low in March as new orders shrank, signalling persistent weakness in the world’s second-largest economy.
“The general trend is up and this is supported by the weaker U.S. dollar, however, the weak China data this morning is putting the brakes on the upward movement,” said Daniel Briesemann, an analyst at Commerzbank in Frankfurt.
“I think there’s still room for more price recovery. The low prices of some of the metals, particularly copper and zinc, are not justified by fundamentals.”
Copper has rebounded 14 percent since touching a 5-1/2 year low of $ 5,339.50 in late January, partly fuelled by bearish investors buying back their short positions.
A break above $ 6,300 may trigger some panic-buying by consumers, said a broker in Hong Kong.
Also dampening copper prices was a rise in LME copper inventories, raising more questions about whether rising mine supply was creating a market surplus.
“People are still questioning the strength in demand. But if I was a Chinese consumer, I would be trying to stockpile as much as possible at these low price levels because they are only going higher given the dollar,” said Jonathan Barratt, chief investment officer at Ayers Alliance in Sydney.
The dollar dipped against the euro and yen, succumbing to downward pressure from lower U.S. debt yields. A weaker dollar makes commodities priced in the U.S. currency cheaper for buyers using other currencies.
LME nickel was the biggest decliner, shedding 1.2 percent to $ 14,170 a tonne after LME stocks increased, moving towards a record high touched earlier this month.
Demand for nickel pig iron (NPI) in China has not picked up as strongly as expected after the Lunar New Year holiday, Chinese industry sources said, while China’s refined nickel imports jumped by a third in January to more than 10,000 tonnes.
The imports were expected to continue in March, given weaker LME prices and the Chinese market having tightened due to NPI production cuts due to low prices and environmental clamp downs, analyst Gayle Berry at Jefferies said in a note.
Copyright Reuters, 2015
