METALS-Copper climbs on China manufacturing data

Thu Aug 22, 2013 12:20pm EDT

* HSBC Flash PMI for China hits 4-month high of 50.1

* Korea Zinc buys from LME zinc stocks in Malaysia

By Silvia Antonioli and Harpreet Bhal

LONDON, Aug 22 (Reuters) - Copper rose on Thursday after manufacturing data for August from top metals consumer China suggested the world's second-biggest economy might be stabilising and its demand for commodities could pick up.

Activity in China's manufacturing sector hit a four-month high as new orders rebounded, a preliminary private survey showed.

The Flash HSBC Purchasing Managers' Index rose just above 50, marking a return to growth in manufacturing activity, albeit very slight.

"There was a very positive reaction to the Chinese manufacturing data today since we are back above 50, and that suggests the government's 7 to 7.5 percent growth target could still be achieved this year," VTB Capital analyst Andrey Kryuchenkov said.

"There is also some technical buying taking place but little development on the spot physical market just yet, so I expect prices will remain broadly in range in the short term."

Benchmark copper on the London Metal Exchange (LME) ended at $7,320, from a last bid of $7,240 on Wednesday, after hitting a session high of $7,389.

The metal has rebounded 11 percent from a three-year trough in late June but is still down about 7 percent this year.

Data showing Germany's private sector expanded in August at its fastest rate since January was also supportive and a further sign that Europe is on a recovery track, which bodes well for copper demand.

China is already building, or has approved, more than half of a $100 billion network of high-voltage power lines to connect remote energy-producing regions to the east coast, a top official at the state grid firm told Reuters.

China accounts for 40 percent of refined copper demand and the power sector is its biggest consumer due to the metal's high conductivity.

FED TIMING

Clouding the outlook for metals is uncertainty over the impact of the U.S. Federal Reserve's plans to start tapering its stimulus measures soon.

Minutes from the latest monetary policy meeting showed a few Fed officials thought it would soon be time to slow the pace of their bond buying "somewhat".

Tapering expectations pulled emerging market currencies and shares down and boosted the dollar and U.S. debt yields on Thursday.

INTL FCStone analyst Edward Meir said that signs of improvement in the U.S. economy could give the Fed additional justification to start moving on its tapering programme in September.

"However, we still don't think that investors have fully discounted September as being a potential start date, and so various complexes could run into more selling pressure next month as this realisation sets in," he said.

Latest data showed the number of Americans filing new claims for jobless benefits held near a six-year low last week, and U.S. manufacturing activity hit a five-month high this month, suggesting the economy is starting to find firmer footing.

Korea Zinc has bought zinc from LME stocks in Malaysia to meet contractual sales amid a supply shortage in the region and a pick-up in Chinese demand, traders said.

Traders said premiums for zinc have climbed about $20 in the last week, with estimates at $180-$205 FOT (free on truck.)

Zinc closed at $1,974 from $1,967 on Wednesday, while aluminium ended at $1,884 from $1,897, and lead closed at £2,209 from $2,213.

Nickel ended at $14,430 from $14,425, and tin , untraded at the close, was bid at $21,875 from a close of $21,800 on Wednesday.

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