London copper was stuck near three-month lows on Wednesday as more evidence of brighter economic prospects in the United States failed to overcome jitters over Chinese growth and swelling supply of the metal.
Manufacturing in China, the world’s top user of most metals, unexpectedly picked up some momentum in September, even though factory employment slumped to a 5-1/2-year low, according to a purchasing managers’ survey.
The improvement was partly seasonal but was likely to stretch into coming months, which, with more targeted economic stimulus by China, would underpin the demand for metals, said Wan Ling, an analyst with consultancy CRU in Beijing.
“In August, it’s not great, to be honest, but in September usually manufacturing activity improves. And I do believe China will do a little more minor stimulus to help the economy - but as always, it won’t do big stimulus,’’ she said.
LME copper
Three-month copper on the London Metal Exchange was at $6,719 a tonne by 0309 GMT, little changed from the previous session when it also closed steady.
Copper prices slumped to the lowest in three months on Monday at $6,707.25 a tonne, weighed down by jitters over China’s growth and the prospect of increased refined supply.
The most traded December copper contract on the Shanghai Futures Exchange was flat at 47,990 yuan ($7,820) a tonne.
Newmont Mining output forecast
Newmont Mining Corp raised its full-year copper production forecast this week after ending a tax dispute with the Indonesian Government, which allows it to resume shipments from the country. Indonesia had enforced a ban on ore shipments in January.
Indonesia’s biggest copper miner, Freeport-McMoRan Inc , has already resumed shipments.
The pick-up in supply is feeding through into China’s smelters. China’s refined copper production rose 7.4 per cent in August from July to a record 680,128 tonnes.
“That looks like the start of this oversupply story coming through but we need to see it for a few months to ease the physical market tightness,’’ said a trader in Singapore, adding that traders who shorted the market now could get burnt.
A lack of immediately available copper metal was reflected in LME spreads, with cash copper trading at a $50 premium against the benchmark this week, the highest since late May.
US manufacturing activity
Elsewhere, US manufacturing activity hovered at a near 4-1/2-year high in September and factory employment surged, supporting views of sturdy economic growth this quarter.
But global goods trade will grow less than hoped this year and next, and factors including regional conflicts and the Ebola outbreak are putting a quick return to stronger growth at risk, the World Trade Organization had said on Tuesday.
Among other metals, ShFE zinc rose 1 per cent, extending a rebound from 2-1/2-month lows reached on Monday.
Smelters have boosted production and stocks in bonded warehouses have climbed to around 100,000-200,000 tonnes from around 50,000 tonnes at the start of the year, dampening zinc premiums and in turn eroding import demand, Ling said.