METALS-Copper near 3-week high; China data fuels gains

Mon Jun 23, 2014 12:30pm EDT

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By Maytaal Angel

LONDON, June 23 (Reuters) - Copper futures on the London Metal Exchange (LME) hit their highest level in nearly three weeks on Monday on tight supply and signs of improved growth in top copper consumer China.

The HSBC/Markit Flash China PMI showed China's factory sector activity expanded for the first time in six months in June, offering new signs the economy is stabilising thanks to Beijing's measures to shore up growth.

In the United States, the manufacturing sector expanded more strongly than expected in June, with the rate of growth and key subindexes advancing to their highest levels in more than four years, an industry report showed on Monday.

The global refined copper market showed a 205,000 tonnes deficit in the first three months of the year, compared with a 206,000 tonnes surplus in the same period a year earlier, the International Copper Study Group (ICSG) said.

Meanwhile, LME inventories fell 850 tonnes to 158,575 tonnes - the lowest level in nearly six years - while cash copper held onto its premium over the three-month price MCU0-3, also indicating supply tightness MCUSTX-TOTAL.

"Copper is being supported by robust demand from China, tight stocks and a market deficit that wasn't expected by most observers. Growth of 7.5 pct is not weak for the world's second-largest economy," Commerzbank analyst Eugen Weinberg said.

Three-month LME copper closed at $6,885 a tonne after hitting $6,900 a tonne, its highest since June 3. It closed at $6,820 on Friday.

The most-traded August copper contract on the Shanghai Futures Exchange rallied 2.3 percent to 49,550 yuan ($8,000) a tonne. It had earlier climbed to 49,610 yuan a tonne, the strongest since Feb. 25.

China imported 282,969 tonnes of copper in May, up 21.89 percent versus a year ago, and bringing annual gains for the year to date to nearly 50 percent, China customs data showed on Monday.

Limiting gains in copper was a continuing investigation into suspected fraud at a Chinese port, which has caused banks to take longer to approve loans for copper imports.

Shaken by a fraud investigation into metal financing in the world's seventh-busiest port, banks and trading houses have been made painfully aware of the risks they face storing commodities in China's sprawling warehouse sector.

"Certainly China will reduce imports because of this financing issue and it will also take a longer time to get cleared," said Helen Lau, senior mining analyst at UOB-Kay Hian Securities in Hong Kong.

But suggesting further gains in the near term, ShFE and LME copper punched through their 200-day and 100-day moving averages respectively, a key buy signal for chart-following strategies.

LME zinc, untraded at the close, was last bid at $2,184 a tonne, after hitting a new 16-month peak of $2,198, from $2,177 at the close on Friday.

The metal hit 16-month highs last week after data showed a rising market deficit. Investors expect the deficit to grow as more major mines shut down.

LME lead closed at $2,177 a tonne, having hit its highest since late April at $2,175. It closed at $2,130 on Friday.

Aluminium closed at $1,890 a tonne from $1,886 on Friday, tin at $22,525 a tonne from $22,575 and nickel at $18,425 a tonne from $18,400.

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 Melanie Burton; editing by William Hardy, Keiron Henderson and David Evans)

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