Shanghai copper pushed up on Thursday after a rally in London futures in the previous session on positive US data and threats to supply, but sentiment was fragile as investors fretted that Chinese demand may slow.
The most-active August copper contract on the Shanghai Futures Exchange rose 0.6 percent to 63,220 yuan a tonne, from 62,830 yuan on Wednesday. Copper for delivery in three months on the London Metal Exchange eased $30 at $7,260, after rallying 1.6 percent on Wednesday.
"Copper was quite oversold on Wednesday and dipped to $7,050, but support held and prompted buyers to move back in," Man Financial analyst Edward Emir said. "There was also some favourable US data which also supported sentiment. People are ratcheting up their estimates for second-quarter GDP growth to 3.5 to 4 percent from 0.6 percent in the first quarter, which was supportive."
US equities rose after data pointing to strength in the US consumer spending boosted optimism and a pullback in benchmark bond yields helped lift global stock markets. But Emir warned that rising interest rates remained a threat to commodities markets. "Even though we are bouncing back in the United States, there is growing concern about China.
They will have to raise interest rates and there is political pressure to revile the yuan." Four US senators unveiled a bill on Wednesday boosting pressure on China to let its currency rise in value after the US Treasury declined to brand the "undervalued" yuan a deliberate trade ploy.
The bill reflects growing frustration in Congress over the huge US trade deficit with China, which hit a record $233 billion in 2006. The threat of supply disruption at a number of large producers, combined with limited stocks in LME warehouses, which equate to just over four days of world consumption, meant investors were unwilling to bet on falling prices.
"Prices have been easing, the dollar is moving the wrong way and producers will not be unhappy to see supply threats making the news," an LME dealer said. Union workers at two copper mines and a smelter in Peru owned by Southern Copper Corp have broken off wage talks with the company and are threatening to go on strike. Workers are seeking an interim salary agreement, while they push for a contract to company earnings. Southern Copper is one of the world's largest copper producers and is controlled by Group Mexico.