London copper climbed in thin trade on Wednesday, underpinned by gains in oil, but traders were reluctant to take on big positions given worries over Chinese demand growth, and as business slackens ahead of Lunar New Year.
“Everybody is ready for holidays now, so I would say physical demand is pretty soft and sentiment is very bearish,’’ said analyst Judy Zhu of Standard Chartered in Shanghai.
“People don’t want to be rushing into the market at the minute. Everybody is just waiting for after the Lunar New Year holidays to see how demand will do. So probably we will have to wait till mid-March. In between, prices can move sideways.’’
Three-month copper on the London Metal Exchange climbed 0.6 per cent to $5,626 a tonne by 0628 GMT, paring losses of 1.4 per cent from the previous session when it hit its lowest in a week at $5,560.50 a tonne. Prices are just a small stretch from last month's five-and-a-half-year low of $5,339.50 a tonne.
The most-traded April copper contract on the Shanghai Futures Exchange slipped 0.5 per cent to 41,100 yuan ($6,585) a tonne, having cut earlier losses of more than 1 per cent.
Copper’s rebound off its lows was not driven by improving fundamentals, said JP Morgan in a research note.
“Rather, support was likely provided by a combination of an oil price rally and increasing expectations that the Chinese economy has stalled to the point that the government will be compelled to respond with further stimulus...We remain cautious on copper for the balance of 1Q.’’
JPM sees LME cash copper averaging at $5,800 a tonne in the first quarter.
Brent crude held steady above $56 a barrel on Wednesday, and US crude rose briefly more than $1, after a smaller-than-expected rise in US crude stocks was viewed by some as a sign that a supply glut was starting to abate.
China’s central bank had made clear on Tuesday it was ready to fight any downturn in the world’s second-largest economy as it warned of strong headwinds to growth and likely anaemic global demand.
In news, Rio Tinto is expected to star among the top five global miners with a return of billions of dollars to shareholders at its annual results, even as the firm is set to report its worst half-year profit since 2009.
Marine insurers have issued warnings about the risk of shipping bauxite in case excess moisture liquefies the cargo and makes it unstable after a ship carrying a Malaysian shipment of the ore sank last month.