Copper moves higher

Copper edged higher on Monday, taking heart from recent Chinese import data and supply problems in Chile and elsewhere, but gains were limited by a wave of risk aversion that swept through the markets due to the eurozone debt crisis and the threat of a US default.
Benchmark copper on the London Metal Exchange closed at $9,694 a tonne, up slightly from $9,672 at the close on Friday. "Copper has been behaving well ever since we got the Chinese import data last week, and these supply glitches are keeping something of a floor under the market," said MF Global analyst Edward Meir. "We're also not at a point where the demand readings are starting to tail off. I think they will eventually, but we're not seeing it yet."
A once in half a century winter storm hit mining operations in the northern part of top producer Chile this month, forcing more than half a dozen mines to halt operations or slow mining after dirt roads at their open pit operations became dangerously slippery.
Data earlier this month showed that imports of copper by China, which accounts for an estimated 40 percent of global copper consumption, rose 9.9 percent in June from a month earlier.
But concerns remain that China could rein in its economy further, which would impact metals consumption. The metal used in power and construction hit a three-month high of $9,789.75 a tonne on July 8, a day before data showed inflation in China rose 6.4 percent year-on-year in June from 5.5 percent in May.
"That was a nasty upward surprise in Chinese inflation. The danger is that China's restocking phase could be a little bit delayed," said Nic Brown, an analyst at Natixis.
"We wouldn't be at all surprised to find that now base metals have rallied, buying from China dries up a little bit." China's economy grew a faster-than-expected 9.5 percent in the second quarter, helped by solid domestic consumption and investment, which eased fears of a hard landing and strengthened Beijing's resolve to fight persistently high inflation.
In the United States, also a large metals consumer, there were deepening concerns that it could default. Failure to reach a deal to increase the debt ceiling could send shock waves through global financial markets and plunge the country into another recession, economists have warned.
"It's not looking good, I can't see what would push copper back above the $10,000 level," a LME trader said. LME copper hit a record high of $10,190 a tonne on February 15.
The eurozone's debt problems also weighed on sentiment as Europe struggles to put together a second bailout for Greece and prevent the region's debt crisis from spreading.
"With global economic growth slowing, demand growth is set to decelerate this year," Bank of America Merrill Lynch said in a note. "High copper prices meant only subdued buying has emerged from commercial players." BoA forecasts a deficit for the copper market this year and a "small deficit" for the aluminium market.
Three-month aluminium was untraded at the close, but last bid at $2,495 a tonne from $2,494 at Friday's close. The metal used in transport, packaging and construction has been supported by bank financing deals that have tied up about 70 percent of stocks in LME-registered warehouses.
Aluminium will be supported by changes in China, Brown said. "You can probably explain some of that by anticipation of a move from 13 percent to 9 percent rebate, which is encouraging aluminium exports, encouraging use of aluminium."
China is weighing whether to cut export rebates for some aluminium extrusion products to 9 percent from the current 13 percent and whether to abolish the 5 percent rebate for exporting stainless steel wires and rods. Zinc closed at $2,431 a tonne from $2,375 on Friday, while lead was $2,730 from $2,708. Tin was untraded at the close, but bid at $27,350 from $27,200, and nickel closed at $23,825 from $24,155.