May 21, 2012 / 1:55 AM / 7 years ago

Copper rises 1 percent on China stimulus hopes

NEW YORK/LONDON (Reuters) - Copper rose 1 percent in moderate volume on Monday as demand prospects improved after the Chinese premier called for extra efforts to support growth in the world’s top metals consumer.

A worker checks a shipment of copper inside the plant at the copper refinery of Codelco Ventanas in Ventanas city, about 164 km (101 miles) northwest of Santiago, April 16, 2012. REUTERS/Eliseo Fernandez

“We should continue to implement a proactive fiscal policy and a prudent monetary policy while giving more priority to maintaining growth,” Premier Wen Jiabao said on Sunday.

The supportive comments attracted more interest from copper investors, many of whom had already been buying in the market after prices collapsed last week to their lowest in four months.

“China has already been stimulative this year, and to say that they will be more stimulative or will continue to be stimulative is a positive,” said Adrian Day, president at Adrian Day Asset Management, which has $165 million in assets.

“We are definitely buying. I don’t see China’s economy slowing sufficiently to cause the copper price to go down significantly from where we are.”

London Metal Exchange (LME) three-month copper ended up $81 or 1 percent at $7,731 a metric ton (1.1 ton).

In New York, the July COMEX contract gained 3.35 cents to settle at $3.5020 per lb, after dealing between $3.4360 and $3.5205.

COMEX copper volumes reached 56,800 lots in late New York business, nearly a third below the 30-day average, according to preliminary Thomson Reuters data.

Despite the early-week bounce, prices of the red metal are down almost 8 percent so far this month.

“These levels are attracting some bargain hunters and the shorts need to cover their commitments,” said Robin Bhar, analyst at Societe Generale.

“And it (copper) is responding to comments from China that they may try to stimulate their economy. But it is unclear whether that will be done through a fiscal stimulus as we saw in 2008 or more aggressive interest rates cuts.”

Leaders of the Group of Eight industrialized nations meeting at the weekend vowed to combat financial turmoil and revitalize a global economy threatened by Europe’s debt crisis, but they offered no specific prescription for debt-crippled Greece, which is to hold elections on June 17.

Recent opinion polls show Greek voters are returning to the establishment parties that negotiated its bailout, offering potential salvation for European leaders.

But deepening banking-sector instability in Spain heightened concerns about contagion from Greece’s political turmoil, meaning investors will probably stay risk-averse at least until the Greek election.

“Compared to the pessimism that was going around last week, there has been some recovery, but the next significant move (in copper) is going to be in a downward direction,” Capital Economics commodities economist Ross Strachan said.

COPPER STOCKS RISE

The latest LME data showed copper stocks rose 3,200 metric ton (3,527 tons) to 224,375, with net inflows into mostly South Korea, where traders suspect Chinese merchants have booked around 110,000 metric ton for delivery.

“If we see LME stocks continuing to move higher, that would be a significant turnaround and we should see prices coming under additional pressure as those stocks accumulate,” Societe Generale’s Bhar said.

China is the world’s largest copper consumer, accounting for around 40 percent of global demand. Metals warehouses in China are said to be so full that workers are starting to stockpile iron ore in granaries and copper in car parks.

In the United States, money managers monitored by the Commodity Futures Trading Commission slashed their net long or “buy” positions in copper in the week of May 15 by the largest amount since the start of April.

In other metals, aluminum closed down $21 at 2,047 a metric ton, even as physical premiums soared to their highest in almost two years.

Additional reporting by Harpreet Bhal; Editing by Dale Hudson and William Hardy

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