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Copper rises, but market fearful over Chinese stock rout

Copper rises, but market fearful over Chinese stock routLONDON: Copper prices rose on Tuesday, but the market remained nervous over the latest convulsions in Chinese equities and the possible ramifications for demand from the world’s top metals consumer.

Chinese shares fell as Beijing scrambled once again to prop up a market whose wild gyrations have heightened fears about the financial stability of the world’s second-biggest economy.

“There is tremendous downside pressure coming from the Chinese stock market. Fear is the ascendant emotion at the moment,” said Macquarie analyst Vivienne Lloyd.

“The weak (manufacturing survey) last week reinforced the unease.” China’s factory sector contracted by the most in 15 months in July as shrinking orders depressed output to its lowest since March 2014, a private survey showed, reinforcing views that the Chinese economy needs more stimulus.

Benchmark copper on the London Metal Exchange was up more than 1 percent at $ 5,255 a tonne at 1057 GMT from $ 5,188 at the close on Monday, when the metal used in power and construction hit a six-year low at $ 5,164. “There’s some profit-taking on short positions across the metals complex,” a metals trader said. “We need more momentum to shake out more of those shorts.”

Three-month aluminium gained to $ 1,654, from $ 1,639 on Monday; nickel to $ 11,230 from $ 11,000, lead to $ 1,717 from $ 1,696 and zinc to $ 1,962 from $ 1,933.

Many are reviewing previous expectations of higher zinc prices over coming months due to tighter supplies.

“Continued sluggish growth in galvanized steel sheet production in China and subdued Chinese H1 construction do not support the consensual bullish demand thesis despite clear signs of improvements in other keys market such as the United States,” Citi said in a note.

“Softer real demand, in conjunction with still strong supply growth this year, and (dollar)-driven macro headwinds, should ultimately underscore the price trajectory for zinc in 2015.” Tin rose to $ 16,070, from $ 15,650 at Monday’s close.

The soldering metal earlier gained more than 3 percent to match its May 8 high on expectations of falling shipments from top exporter Indonesia from Aug. 1.

Indonesia is tightening rules for tin exports, in a fresh bid to crack down on environmental degradation and smuggling, and to enforce payment of royalties and taxes on shipments.

Under new rules announced in May, refined tin producers must hold “clean and clear” certification, to show that the tin ore they use originates from government-certified mines.

Some traders and analysts are sceptical about the government’s ability to implement the new rules.

Copyright Reuters, 2015

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