* Mild improvement in China copper consumption
* LME copper signals mixed -technicals
* Coming Up: U.S. jobless claims, weekly; 1230 GMT
(Adds details; updates prices)
By Rujun Shen
SINGAPORE, April 26 London copper edged up to a
two-week high on Thursday, but prices were trapped in rangebound
mode as the market was torn between a lackluster picture of
demand from top consumer China and a squeeze in London.
Copper extended gains from the previous session, during
which the U.S. Federal Reserve offered a brighter economic
outlook, while Fed Chairman Ben Bernanke's comment that
quantitative easing was still on the table was not received
warmly by copper investors in the early hours.
Quantitative easing raises the inflation outlook and helps
increase asset prices. Economists at most major Wall Street
firms believe there is a less then 30 percent chance the Fed
will undertake another massive round of monetary stimulus, a
Reuters poll showed.
"Bernanke's comments on the possibility of QE3 (the third
round of quantitative easing) are biased towards being bullish
for copper, but its effect is rather limited after the prospects
of more QE have been diminishing over the past month or two,"
said Fang Junfeng, an analyst at Shanghai CIFCO Futures.
Fang expected Shanghai prices to range between 56,000 yuan
and 59,000 yuan for the foreseeable future.
Three-month copper on the London Metal Exchange
edged up 0.3 percent to $8,228 a tonne by 0702 GMT, off a
two-week high of $8,243.
It stood above the 100-day moving average of $8,160.67, and
attempted to stay above the 200-day moving average at $8,224.84,
below which it has been trading for more than two weeks.
The most-traded July copper contract on the Shanghai Futures
Exchange closed up 1.2 percent at 58,290 yuan ($9,200)a
Trading volume is likely to thin ahead of a holiday-laden
week in Asia, as China's market will be closed on Monday and
Tuesday, and Japan shut on Thursday and Friday.
China has announced its 2012 targets for reducing production
capacity of copper, aluminium, zinc and lead. Beijing has in the
past few years repeatedly ordered that excessive capacity be
eliminated, but the effort has been fruitless on lack of
cooperation by local governments.
CHINA PICTURE VS. LME SQUEEZE
The total open interest in Shanghai copper rose 268 lots to
506,634 lots, after counting both buying and selling
transactions, having fallen for two straight sessions from an
all-time high of 544,076 lots hit earlier this week.
The Shanghai copper curve flipped back into a small contango
from backwardation in the previous session, while the premium in
London cash to three-month copper prices shot up to $108, edging
closer to $114 hit last week -- its highest since August 2008.
The tightness in the spot market was also reflected in an
eight-year high in the ratio of cancelled warrants to total LME
stocks, at 42.19 percent, while the total stockpile
<0#MCUSTX-LOC> is near its lowest level since late 2008.
But some traders and analysts said it had little to do with
the sluggish demand picture in China, and was caused instead by
an artificial supply squeeze due to some large trading houses
holding dominant positions on the LME.
"The views on price moves are very contradictory and that's
why you see rather high open interest in Shanghai -- people who
look at fundamentals believe that prices should head south,
while those who think the short squeeze will continue expect
prices to rise," said a Shanghai-based trader.
Base metals prices at 0702 GMT
Metal Last Change Pct Move YTD pct chg
LME Cu 8228.00 23.00 +0.28 8.26
SHFE CU FUT JUL2 58290 700 +1.22 5.29
HG COPPER MAY2 371.70 1.70 +0.46 8.18
LME Alum 2080.00 5.00 +0.24 2.97
SHFE AL FUT JUL2 16180 35 +0.22 2.11
LME Zinc 2014.25 8.75 +0.44 9.17
SHFE ZN FUT JUL2 15595 95 +0.61 5.41
LME Nickel 17800.00 195.00 +1.11 -4.86
LME Lead 2095.00 4.00 +0.19 2.95
SHFE PB FUT 15815.00 95.00 +0.60 3.47
LME Tin 21900.00 -25.00 -0.11 14.06
LME/Shanghai arb^ 2398
Shanghai and COMEX contracts show most active months
^ LME 3-month copper in yuan, including 17 pct VAT, minus SHFE third month