NEW YORK/LONDON: Copper ended with a 0.5-percent gain on Monday, supported by broader market strength and brighter Asian demand prospects seen in the aftermath of a two-week slide in international market values.
The economically-sensitive industrial metal collapsed alongside volatile equity markets, losing as much as 16 percent of its value in the first two weeks of August, after the US downgrade stoked fears of another recession and reinforced a depressed demand outlook for the industrial metal.
But within the sharp two-week downturn, analysts saw a glimmer of demand optimism reflected in the Shanghai Futures Exchange and London Metal Exchange (LME) arbitrage, which turned positive in Shanghai's favor all the way out to June 2012.
"We would expect the Chinese to do some spot and forward buying particularly as they are unlikely to see prices much lower than current levels in coming weeks," Janet Mirasola, R.J. O'Brien & Associates' managing director said in market comment.
London Metal Exchange (LME) copper for three-month delivery ended up $44 or 0.5 percent at $8,909 per tonne.
In New York, the September COMEX contract firmed 2.00 cents to settle at $4.0320 per lb, near the upper end of its $3.9880 to $4.0580 session range.
Investors remained cautious at the start of the new trading week, with late New York trading volumes crawling to a little more than 28,000 lots, about 40 percent below the 30-day norm, according to preliminary Thomson Reuters data.
"Copper is tracking gains in global equity markets where sentiment has improved slightly. Everyone knows that the recovery is stagnating but as far as copper is concerned it's more important to see how growth rates in China are delivered," said Andrey Kryuchenkov, analyst at VTB Capital.
Upbeat economic numbers from Japan helped equity markets push higher after data showed Japan's economy shrank less than expected in April-June following the earthquake and tsunami in March. Japan accounts for 5 percent of world copper demand.
US data, however, continued to disappoint the market, with a gauge of manufacturing in New York State showing the sector unexpectedly contracted for the third month in a row in August.
Offering additional support for copper prices, inventories of the metal in LME-monitored warehouses fell by 1,175 tonnes to 460,600 tonnes -- a low dating back to late April.
"During what is normally a weaker month for copper (demand) the LME inventories have not been rising. That's certainly something," said Nick Moore, global head of commodity strategy at RBS Global Banking and Markets.
Weakness in the dollar also helped support prices, with the US currencies falling by around 1 percent against a basket of major currencies. A weaker dollar makes commodities cheaper for holders of other currencies.
Reflecting nervousness in markets in recent weeks, the latest CFTC data showed a scaling back of non-commercial long positions in COMEX copper, with net long positions cut by 16,711 contracts in the week to Aug. 9.when it rallied as much as 5 percent after Indonesia said it would impose a new royalty charge on all tin shipments.
Nickel eased $100 to close at $21,300 a tonne. The latest monthly bulletin from Lisbon-based International Nickel Study Group (INSG) showed the global nickel market was in deficit by 2,600 tonnes in the first half of 2011.
Copyright Reuters, 2011
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