METALS-Copper up on China's GDP growth, weaker outlook caps rise

Fri Oct 18, 2013 12:07pm EDT

Related Topics

* China GDP grows 7.8 pct in Q3, matching forecast

* 2014 outlook bearish on China restructuring, US shutdown

* Bosnia plans to help Aluminij Mostar smelter

* Indonesia takes steps to nationalise Inalum

By Freya Berry

LONDON, Oct 18 (Reuters) - Copper prices rose slightly on Friday, supported by data showing China's economy had expanded as forecast in the third quarter, although concerns that the faster growth may be temporary limited gains.

China's economy grew 7.8 percent in the third quarter, its fastest pace this year, as strengthening foreign and domestic demand helped factory production and retail sales.

China is the biggest consumer of copper, accounting for 40 percent of world demand.

Benchmark three-month copper on the London Metal Exchange edged up 0.2 percent to close ring trading at $7,245 a tonne.

"The Chinese data was broadly positive, and we've seen a bit more of a risk-on kind of move," Tom Kendall, an analyst at Credit Suisse said. "The market is already starting to price in the fact that demand in China has been fairly robust."

But with Beijing now favouring consumption over production in its drive for sustainable growth, analysts warned that China may not soak up so much copper in future, as it shifts down a gear from decades of double-digit expansion.

"I haven't really changed my bearish view for 2014 and 2015, because we expect China's industrial production growth to slow as the growth becomes less investment-driven," said Helen Lau, senior metals analyst at UOB Kay Hian Securities in Hong Kong.

China's copper imports jumped 18 percent from August to hit an 18-month high in September as end-users rebuilt inventories, although analysts said the chances of that momentum being sustained were slim.

SUPPLY ISSUES

On the supply side, analysts forecast copper surpluses on increased mine production. Earlier this week Rio Tinto posted a 23 percent jump in third-quarter mined copper output.

"We see supply growth outrunning demand growth," Kendall said, putting average 2014 prices at $6,625.

Concerns also remained over the United States, where federal agencies reopened on Thursday after the government managed to pass a deal to end a shutdown and raise the debt ceiling.

Economists warned that the impasse will have taken a 0.1 percent chunk out of growth for each week that the 16-day deadlock lasted.

In the aluminium market, Bosnia's regional government has proposed to help smelter Aluminij Mostar settle a debt to the state-run power utility and stave off closure. The company is struggling with a metal surplus and high power prices.

Meanwhile, Indonesia plans to buy out the Japanese shareholders of PT Indonesia Asahan Aluminium (Inalum), a government minister said, avoiding a legal dispute and laying the ground for nationalisation.

Aluminium closed trading down 0.2 percent to $1,847 a tonne.

In other metals, zinc firmed up 0.1 percent to close at $1,934 per tonne, and lead ended flat at $2,175.5 per tonne. Tin lost 0.2 percent to finish at $22,705.

Nickel hit a near-month high, closing trading up 1.4 percent to $14,200, in the latest sign that the year's worst-performing base metal may be bottoming out.

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