London copper rises from 9-month low

SINGAPORE: London Metal Exchange copper rose as Chinese buyers took advantage of the lowest price in nine months to stock up on the metal.

Economic worries continue to weigh on copper ahead of the result of a US Federal Reserve meeting later on Wednesday that could see more monetary easing in the world's largest economy, after the International Monetary Fund warned about growth.

"The economy is still the general concern and the negative sentiment remains but China is restocking," said Jonathan Barratt, managing director for Commodity Broking Services in Sydney.

The Shanghai front-month October contract is trading at a 440-yuan premium to the most active December contract, indicating some restocking by copper users.

Three-month copper on the London Metal Exchange climbed 0.5 percent to $8,353.25 a tonne by 0700 GMT, after dropping 0.7 percent in the previous session. Prices fell as low as $8,238 on Wednesday, the lowest since November 30.

The most active December copper contract on the Shanghai Futures Exchange edged down 0.03 percent to 62,940 yuan ($9,859) per tonne.

LME copper is at a 611 yuan ($96) per-tonne discount to Shanghai copper, taking into account 17 percent VAT, encouraging arbitrage trade. The discount widened from 234 yuan at 0706 GMT on Tuesday.

China's refined copper imports rose 32 percent in August from July to 235,509 tonnes, but fell 12 percent from a year earlier.

ECONOMY WEIGHS

The IMF reduced its prediction for global growth this year and next, saying the US and European economies could slip back into recession.

The latest IMF report "added to the pessimistic outlook for global copper consumption in the second half of the year," Phillip Futures said in a report.

Copper in London is expected to fall below $8,190 per tonne, while Shanghai copper's bearish target at 61,030 yuan per tonne is unchanged, according to Wang Tao, a Reuters technical analyst.

Markets are focusing on a two-day Federal Open Market Committee meeting expected to end Wednesday with a decision to purchase longer-term US Treasury debt, a move that would force interest rates lower and could weaken the dollar.

The other major factor for markets is whether Europe can pull of its debt crisis. Recent news hinted at Beijing backing away from the idea of snapping up euro zone debt, after a former adviser to China's central bank said on Wednesday that China should refrain from buying European government bonds.

Greece's negotiations to qualify for its next aid package and the threat of the debt crisis spreading in the euro zone are clouding the outlook for industrial metal demand.

European stock index futures fell on Wednesday and the dollar edged up against a basket of currencies before a possible Fed announcement of a stimulus plan.

A strike at Freeport-McMoRan Copper and Gold Inc's Grasberg mine in Indonesia has slowed production "significantly," chief executive officer Richard Adkerson told CNBC on Tuesday.

Copyright Reuters, 2011