Copper gains capped by long-term prospects, higher stocks

LONDON: Copper prices firmed on Monday as expectations of robust demand from top consumer China supported sentiment, but doubts about longer-term prospects and a jump in London Metal Exchange stocks capped gains.

Benchmark copper on the LME was up 0.5% at $6,578 a tonne at 1603 GMT. Prices of the metal, used widely in the power and construction industries, are down more than 4% since hitting a 27-month high at $6,877.50 last week.

The rally was based on the massive Chinese fiscal stimulus in recent months, which boosted economic activity and industrial metals demand after the novel coronavirus lockdowns.

"Chinese demand is still rising, but not at the pace it was, there will be resistance to higher prices," said Julius Baer analyst Carsten Menke.

"Stimulus in China pulled demand forward, it did not generate additional demand. It is difficult for China to start large infrastructure projects which have a big impact on the economy because most of them have been done."

DATA: September surveys of purchasing managers in China's manufacturing sector, particularly the new and export order components, due on Wednesday will be scrutinised for clues to demand growth for industrial metals.

DOLLAR: Support for metals came from a lower US currency, which makes dollar-priced commodities cheaper for holders of other currencies, and that could boost demand.

UNITED STATES: Democrats in the US House of Representatives are working on a $2.2 trillion stimulus package that could be voted on this week. Talks on the package had stalled for nearly two months.

INVENTORIES: Stocks of copper in LME registered warehouses jumped 29,500 tonnes to 103,125 tonnes and cancelled warrants -- metal already earmarked for delivery -- slipped to 41% from near 60% last week.

This has eased concerns about a tight LME market and the premium for the cash over the three-month contract has reversed into a discount.

OTHER METALS: Aluminium was up 1.6% at $1,777 a tonne, zinc gained 2.6% to $2,431, lead added 0.5% to $1,844, tin rose 1% to $17,355 and nickel climbed 1.7% to $14,510.