Copper prices steadied on Tuesday as the market waited to see whether signs of stronger demand in top consumer China are confirmed over coming months.
Benchmark copper on the London Metal Exchange ended unchanged at $5,065 a tonne. Prices of the metal are up about 17 percent since the middle of January due to improving sentiment about Chinese demand.
Funds have been buying copper for some weeks.As a result, their net long position on the LME last Friday rose to 43,834 lots or nearly 1.1 million tonnes of copper.
Analysts say some restocking by Chinese consumers and expectations of more to come are behind some of the optimism, which was reinforced by a more than 50 percent jump in the country’s copper imports last month.
According to Investec analyst Marc Elliott :
“It’s a seasonally stronger time of year, Chinese consumers are always more active at this time of year. Let’s see if it holds up into the summer,””There are mixed messages coming through on inventories.”
Inventories in LME approved warehouses have tumbled in recent weeks, while those in depots monitored by the Shanghai Futures Exchange have surged.
The movement of stocks can to a large extent be attributed to a reference to the price differential between copper traded on the LME and ShFE. Lower prices on the LME are behind Chinese purchases of the metal.
Macquarie stated that:
“Our latest China copper survey shows some positive signals for the copper market: End-user demand started to show clearer recovery from seasonal softness, fabricators plan to raise production rates and restock copper, and sentiment remains positive across the industry chain, but expectations toward demand recovery seem to be building with positive macro numbers.”
A higher U.S. currency has weighed on industrial metals for most of Tuesday as it makes dollar-denominated commodities more expensive for non-U.S.-firms, a relationship used by some funds to generate buy or sell signals from numerical models.
Three-month aluminium was down 0.7 percent at $1,501 from an earlier $1,494 a tonne, its lowest since Feb 12. It is expected to come under further pressure from Chinese exports and expectations of large surpluses for some years.
Zinc slid 0.1 percent to $1,873 and lead was untraded at the close but bid 0.7 percent lower at $1,815.Tin traded up 1.5 percent to $17,150 and nickel rose 0.3 percent to $8,790.