Copper Rebounds After Encouraging China Factory Data

[UNEEK]

METALS-Copper Rebounds After Encouraging China Factory Data

Harpreet Bhal

Tuesday, 23 Sep 2014 | 6:20 AM ETReuters

   

* China manufacturing unexpectedly picks up in Sept

* Copper deficit narrows to 27,000 T in June - ICSG

* U.S. Markit manufacturing PMI for Sept due at 1345 GMT

 

(Updates prices, adds comment, detail; previous SINGAPORE)

 

LONDON, Sept 23 (Reuters) - Copper prices recovered on Tuesday, bouncing off three-month lows hit in the previous session, as encouraging manufacturing data from top consumer China helped allay some fears about the outlook for demand.

 

Benchmark copper on the London Metal Exchange (LME) traded at $6,743.75 a tonne at 0951 GMT, up 0.4 percent. It had fallen to a three-month low at $6,707.25 in the previous session.

 

China's manufacturing sector unexpectedly picked up some momentum in September even as factory employment slumped to a 5-1/2-year low, reassuring investors who had expected weaker numbers from the world's second-largest economy.

 

The metal used in power and construction is still trading more than 8 percent lower so far this year, weighed down by a combination of demand concerns and rising supplies.

 

"It is good that the Chinese economy isn't collapsing but a weaker PMI (purchasing managers index) number would have raised the likelihood of further stimulus from China, which would have given a boost to copper," said Caroline Bain, senior commodities economist at Capital Economics.

 

"The property and construction sectors in China are still not showing any signs of recovery. That, coupled with signs that copper mine supplies are ramping up, have led us to expect prices to fall further by the end of the year."

 

China accounts for as much as 40 percent of global demand for refined copper.

 

"I think they (metals) have been oversold. But obviously, picking the bottom on these things is difficult when sentiment is changing so quickly in the market. Investors' positioning is definitely on the bearish side," said commodity analyst Daniel Hynes of ANZ in Sydney.

 

"If we did see a couple of positive data points, then the market is certainly ripe for a short-covering rally," Hynes said, adding that physical buyers had been largely sitting on the sidelines.

 

Also helping to push metals prices higher was a rise in the euro against the dollar, after a business survey showed Germany's economy probably expanded in the third quarter.

 

A weak dollar makes commodities priced in the U.S. unit cheaper for holders of other currencies.

 

Weighing on sentiment, however, was the expectation of more copper supplies entering the market.

 

The global refined copper market's deficit narrowed to 27,000 tonnes in June, compared with an 88,000-tonne deficit in May, the International Copper Study Group (ICSG) said.

 

The copper market is expected to be in a 226,000-tonne surplus by the end of 2014, rising to 285,000 tonnes in 2015, a Reuters poll in July showed.

 

PRICES

 

Three month LME copper

Most active ShFE copper

Three month LME aluminium

Most active ShFE aluminium

Three month LME zinc

Most active ShFE zinc

Three month LME lead

Most active ShFE lead

Three month LME nickel

Three month LME tin

 

(Additional reporting by Lewa Pardomuan in Singapore; Editing by Dale Hudson)

 

http://www.cnbc.com/id/102024126