June 25, 2012 / 10:22 AM / 8 years ago

Copper ends up on China buys, U.S. data

NEW YORK/LONDON (Reuters) - London copper rose on Monday for the first time in four days and New York prices also firmed, with sellers silenced at the start of the week by signs of buying in China and improved demand prospects in the United States.

Traders and clerks react on the floor of the London Metal Exchange in the City of London February 14, 2012. REUTERS/Luke MacGregor

Copper pressed higher in healthy volume, as investors shifted their attention away from the European debt situation and focused on an improved demand outlook in the U.S. after data showed new home sales surged in May to a two-year high.

Most other base metals followed copper’s lead. Aluminum futures ended up after sinking to a two-year low, tin bounced away from its lowest since September last year, and zinc fully recovered after dropping to its cheapest since late October.

Investors bet demand prospects will improve should a June 28-29 meeting of European Union leaders produce substantive measures to tackle the debt crisis, now in its third year and bolster Spain, the euro zone’s fourth-largest economy.

“Markets are holding their fire at the moment to see what the Europeans come up with at this week’s leadership conference. If they don’t see any movement on key proposals, they very well could drive the markets lower again,” INTL FCStone analyst Ed Meir said.

London Metal Exchange (LME) benchmark copper ended up $26 at $7,336 a ton, recovering from a Friday trough at $7,219.50 — a low dating back to December.

In New York, the now-active COMEX September contract rose 1.05 cents to settle at $3.3255 per lb, after dealing between $3.2880 and $3.3420.

COMEX copper volumes stood at 84,500 lots in late New York business, a shade above the 30-day average of around 80,000 lots, according to preliminary Thomson Reuters data.

Initial optimism following an agreement by the leaders of Germany, France, Italy and Spain on a 130 billion euro ($156 billion) package to revive growth faded as investors remained pessimistic that this week’s European Union summit will yield concrete measures to tackle the region’s debt crisis.

The Thursday-Friday summit of European leaders is likely to include discussions about specific steps towards a cross-border banking union, closer fiscal integration and the possibility of a debt redemption fund.

The focus also remained on Spain, which formally requested euro zone rescue loans on Monday to recapitalizes banks that are laden with bad debts.

Highlighting investor uncertainty surrounding global growth prospects, data last week from the Commodity Futures Trading Commission showed money managers trimmed their net short copper position during the week of June 19, the first decline in this bearish position in four weeks.

PHYSICAL BUYING

Limited copper restocking by Chinese investors, designed to exploit a favorable arbitrage between London and Shanghai, worked to support prices at the start of the week.

“There has been some consumer buying for copper, but it was only some spot buying and the size moderate. You won’t have the large hedges coming in at this price as people don’t have enough conviction and think the market might be trending lower,” Ivan Szpakowski, analyst at Credit Suisse said.

A Shanghai-based trader said a slight rise in physical copper demand was expected to put a floor below copper prices as consumers took advantage of lower prices and the favorable LME-ShFE arbitrage to restock a bit.

Aluminum ended up $4 at $1,865 a ton, rebounding from an earlier fall to $1,852 — its lowest level since early June, 2010.

“Following the sharp decline in energy prices and thanks to subsidized electricity prices in China, we are also unlikely to see any significant cuts in production (of aluminum) in the foreseeable future, so the aluminum price can be expected to remain under pressure,” Commerzbank analysts said in a note.

Additional reporting by Harpreet Bhal in London and Carrie Ho in Shanghai; editing by William Hardy and Alden Bentley

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