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Friday, February 3, 2023

Copper bounces as China investment news spurs short-covering

LONDON: Copper prices bounced on Thursday to snap a four-session losing streak, as bearish speculators reversed their positions after news about fresh investment in top metals consumer China.

However, copper pared gains and other metals deepened losses after stronger-than-expected US jobs data sent the dollar index surging, making greenback-priced commodities more expensive for buyers using other currencies.

Benchmark copper futures on the London Metal Exchange gained 1.8% to $8,397.50 a tonne by 1545 GMT, after touching a two-month low on Wednesday over worries about slowing economic growth and demand.

China’s southern manufacturing hub of Guangzhou is planning 1,722 projects in 2023 worth more than 6.5 trillion yuan ($945 billion), state media CCTV reported on Thursday.

“Knowing what the year will bring after two days of trading is virtually impossible, so there’s quite a lot of caution regarding getting too stuck with a position that may not end up being the right one,” said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.

“If you started out having a handsome profit on a breakout, then a fundamental piece of supportive news is enough for those sellers to have a rethink.” However, prices are unlikely to make much progress on the upside due to underlying concern about rising COVID-19 cases in China and weakening global industrial activity, he added.

The 200-day moving average at $8,476 would likely cap any moves higher, Hansen said.

Analysts said copper would likely remain trapped in a range ahead of China’s public holiday to celebrate its New Year from Jan. 23 to Jan. 27, when financial markets are closed and economic activities are usually subdued.

The premium of cash LME lead over the three-month contract climbed to $63 a tonne, the highest since December 2021, indicating a near-term shortage of metal in LME warehouses.

On-warrant LME lead stocks, inventories not earmarked for removal, slid to 9,250 tonnes, the lowest in over 40 years, LME data showed. Among other metals, LME aluminium rose 0.3% to $2,272.50 a tonne and zinc added 1% to $3,021.50, but tin edged down 0.4% to $25,005, nickel tumbled 6% to $27,985 and lead fell 1.8% to $2,227.

Copper bounces as China investment news spurs short-covering

Source: Brecorder

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