Copper steady; growth fears offset China stimulus hopes

LONDON Tue Oct 9, 2012 12:23pm EDT

An employee carries copper hoses at the Sociedade Paulista de Tubos Flexiveis (SPTF) metallurgical company which manufactures flexible metal hoses, in Sao Paulo April 20, 2012. REUTERS/Nacho Doce

An employee carries copper hoses at the Sociedade Paulista de Tubos Flexiveis (SPTF) metallurgical company which manufactures flexible metal hoses, in Sao Paulo April 20, 2012.

Credit: Reuters/Nacho Doce

LONDON (Reuters) - Copper prices were little changed on Tuesday as concerns about weak global growth and its implications for industrial metal demand offset expectations for further pro-growth policies from top consumer China, aimed at stimulating the economy.

Benchmark copper on the London Metal Exchange closed at $8,145 a tonne, from a last bid of $8,180 on Monday.

Copper prices have rallied more than 8 percent since the start of September, fuelled by the third round of quantitative easing (QE) by the U.S. Federal Reserve, the promise of bond buying by the European Central Bank (ECB) and stimulus measures in Japan and China.

But the market has been moving sideways this week as uncertainties about real demand from China capped gains.

"There is a bit of an improvement coming through in terms of iron ore and steel but in terms of base metals we haven't seen too much activity this week; we are still waiting to see what China does next," Standard Chartered analyst Daniel Smith said.

"There are a few signs that the property market has started to improve and car sales have maybe turned the corner in terms of price discounting. Eventually we will see a move higher again and this is a bit of a pause before we get there."

Benchmark iron ore .IO62-CNI=SI surged to its highest in almost 2 months and steel futures .IO62-CNI=SI also rose on Monday as Chinese buyers came back to the market after a week-long national holiday but analysts think more stimulus policies are needed in China to boost growth and industrial metals demand.

"Losses in base metal prices will be capped despite weak fundamentals and global economic worries, as investors expect Beijing to do the necessary fine-tuning to stabilize the economy before the 18th Communist Party Congress," said CIFCO Futures analyst Zhou Jie, referring to China's leadership transition event scheduled on November 8.

CHINA DATA EYED

There was little sign of a copper demand improvement in China this week though, even following the week-long holiday, traders said.

"China's copper demand appeared sluggish after traders returned to the market, with spot prices trading at a discount of 150 Yuan/t to SHFE front-month futures," ANZ analysts said in a note.

Investors will eye China's third-quarter growth data next week, which analysts expect to show the weakest three months of the year. China is also expected to announce export-import data for September on Saturday. ECONCN

In industry news, global miner Rio Tinto (RIO.L) cut its growth forecast for China and said it was stepping up efforts to cut costs.

It also expects copper production across the group to increase from 2013, thanks to improving grades at existing mines and the start of production at Oyu Tolgoi, forecasting a cumulative annual growth rate of 13 percent from 2011 to 2015.

Concerns about the lingering debt crisis in the euro zone continued to weigh on risk appetite and push the euro lower against the dollar.

A strong dollar makes commodities priced in the U.S. unit more expensive for holders of other currencies.

The IMF said the global economic slowdown was worsening and cut its growth forecasts for the second time since April, warning U.S. and European policymakers that failure to fix their economic ills would prolong the slump.

In other metals, benchmark tin closed at $21,825, from a close of $22,100 on Monday, while zinc finished at $2,007 from $2,035 and aluminum ended at $2,055 from a close of $2,082.50 on Monday.

Battery metal lead closed at $2,251.50 from $2,260 at the close on Monday and stainless steel material nickel at $17,930 from a last bid of $18,070.

(Additional reporting by Carrie Ho in Shanghai; editing by Keiron Henderson)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.