Copper bounces on prospects for support for Chinese property sector

LONDON: Copper prices rebounded on Wednesday, moving back towards record levels, on hopes for more stimulus in top metals consumer China, especially for its battered property sector.

Benchmark three-month copper on the London Metal Exchange gained 1.2% to $11,626 a metric ton in official open-outcry trading after easing by 1.3% on Tuesday and having hit a record peak of $11,771 a day earlier.

Shares in China’s property sector surged on Wednesday amid market rumours that the government was planning a 400 billion yuan ($56.63 billion) government mortgage subsidy package.

The property sector is a major consumer of copper and other industrial metals.

“A lot of the data recently from China was all pretty abysmal on construction, so it wouldn’t surprise me at all if there’s going to be more stimulus to keep that part of the economy going,” said Dan Smith, managing director at Commodity Market Analytics.

Stimulus for the wider Chinese economy was also needed, analysts said, after data on Wednesday showed that deflationary strains are persisting and domestic demand remains weak.

LME copper has surged 32% this year on worries about mine disruptions causing deficits and as flows of metal to the U.S. tightens supply in the rest of the world.

“I still think the risk is on the upside for the time being. I’ve got a hunch we’re going to go up to $12,000 before the end of the year,” Smith said.

The most-traded copper contract on the Shanghai Futures Exchange closed daytime trading down 0.2% at 91,850 yuan a ton.

The market was also closely watching the U.S. Federal Reserve later on Wednesday, which is widely expected to trim rates but may dampen expectations of further rate cuts.

Caution over future rate cuts has led investors to scale back positions, and expected supply strain outside the U.S. is keeping prices elevated and volatile, analysts at Chinese broker Jinrui said in a note.

Among other metals, LME aluminium rose 0.3% in official activity to $2,865 a ton, zinc gained 0.2% to $3,097, lead advanced 0.5% to $1,987.50, nickel was little changed at $14,735 and tin climbed 1.7% to $40,550.