Copper rises on brighter China factory data

London copper climbed on Thursday from the near one-week lows touched the session before, boosted by improving manufacturing growth in the world’s No1 metals consumer China.

Activity in China’s giant manufacturing sector picked up in October, a preliminary survey showed on Thursday, suggesting the economy may have stabilised, though a strong rebound remains elusive.

But the market remains concerned about a cash crunch in the world’s second biggest economy after China’s central bank declined to inject cash for a third day.

“The big question people are looking at now is what happens in the fourth quarter,” said analyst Ivan Szpakowski of Citi in Shanghai.

“Our view is that it will be slower and a lot of that is basis credit tightening since Q2 and because of that we’re expecting slower growth and that does feed into our bearish copper view.”

Three-month copper on the London Metal Exchange was trading up 0.53 per cent at US$7,209 a tonne by 07.12 GMT, after falling 2.2 per cent the session before.

Copper prices slid to US$7,170 a tonne on Wednesday, the lowest since October 14. Prices have traded in a US$7,000-7,420 band since late August and remain down by more than 9 per cent for the year.

The most-traded January copper contract on the Shanghai Futures Exchange pared early losses to close at 51,730 yuan (HK$65,469) a tonne, still down 1 per cent. It earlier touched 51,430 yuan, its lowest since October 14.

China’s economy is set to grow 7.6 per cent this year, beating the government’s 7.5 per cent target, before losing some steam next year as the government forges ahead with structural reforms, a recent poll showed.

Demand from China, has been decent but not great, added Szpakowski.

“The power industry and telecoms have been relatively weak, also social housing has been down. But at the same time, private housing has been good, machinery and home appliances have been better, air con has been better this year and auto production is up significantly,” he said.

“[But] we think when copper does break out of the range, it’s going to break lower, and that’s primarily due to supply.”

Citi sees the global copper market surplus widening to 450,000 tonnes next year from 300,000 tonnes this year as more mine supply comes on line.

Reflecting a response to lower prices, premiums for bonded copper in Shanghai firmed US$250 to US$180-US$205 according to China price provider Shmet.

The slowdown in Asian economies will likely persist for the rest of this year as weak global growth and reforms under way in many countries hinder activity, polls showed on Thursday.