SINGAPORE: London copper futures edged higher on Monday, bouncing back from losses in the previous session amid a softer dollar, but a shaky demand outlook for the world's top copper consumer China capped gains.
The euro climbed to its highest against the dollar since February 2012, sustaining last week's rally after European Central Bank President Mario Draghi last Thursday gave no indication that the ECB would cut interest rates in the near future.
A weaker dollar makes commodities priced in the greenback cheaper for holders of other currencies such as the euro.
Three-month copper on the London Metal Exchange rose 0.6 percent to $8,089 a tonne by 0703 GMT, after falling as much as 1 percent on Friday.
Despite the gain, weaker Chinese demand and an expected increase in global copper supply this year will keep prices trading in a tight range, said Sijin Cheng, commodities analyst at Barclays Capital.
"Copper supply in 2013 is going to be a lot less tight than it has been in previous years with bigger mines coming online. On the other hand, there's still about a million tonnes of copper in China's bonded warehouses," said Cheng.
Barclays expects global copper supply to outpace demand by 151,000 tonnes this year, compared with a 49,000-tonne surplus in 2012.
Expectations that China's economy may see a modest rebound instead of brisk growth are also likely to cap any gains in copper, which should trade between $7,000 and $8,500 this year, she said.
Copper hit a 2-1/2-month high near $8,300 early in January as risk assets rose after the United States averted a fiscal crisis of steep tax increases and spending cuts. But prices have mostly fallen since then amid signs Chinese demand remains weak.
China's copper imports fell 6.6 percent in December from the previous month and most Chinese consumers will likely hold off on spot purchases of refined copper until after the Lunar New Year break in February.
"Given record high levels of inventory at bonded warehouses, we believe it could take some time for China to destock copper as our inventory model reveals that destocking activity has been quite modest," Deutsche Bank said in a note.
"As a result, we believe that copper imports could remain modest and year-on-year percentage could remain in the negative territory. This could also limit price advances in our view."
The most-traded April copper contract on the Shanghai Futures Exchange gained 0.1 percent to close at 58,520 yuan ($9,400) a tonne.
China's gross domestic product data, due out on Friday, will be the key number to watch as investors seek confirmation of whether the world's No. 2 economy snapped seven quarters of slower growth in the fourth quarter.
Comments
Comments are closed.