Copper rose more than 1 percent on Monday as upbeat manufacturing data in China and the United States helped calm worries over demand prospects for metals, though signs that China's growth rate will slow from stellar levels tempered gains. A stream of new orders buoyed factory activity in China to an 11-month high in March, according to the official PMI, but credit-constrained smaller manufacturers struggled, suggesting the economy was still losing steam.
In the United States, meanwhile, data showed the pace of growth in the manufacturing sector had picked up a tad in March, adding to signs the world's largest economy is picking up steam, though construction spending in February recorded its largest drop in seven months. Three-month copper on the London Metal Exchange closed at $8,640 a tonne from $8,445, with volumes at a good level given Shanghai markets are closed from Monday to Wednesday for public holidays.
"The US is an important market, and with the economic outlook there brightening, demand is also likely to surprise to the upside," said Commerzbank analyst Eugen Weinberg. On China, he said, "Chinese (copper) purchases as of recently were higher than the demand, which means there's a likelihood of lower imports going forward. That is dampening sentiment, but I don't think one should be concerned about China, because growth is likely to continue to surprise to the upside."
The latest stocks data from China showed a drop in Shanghai copper inventories in the past two weeks from near-decade high levels. LME stocks rose for the third time in about four sessions but remained near their lowest since July 2008. Overall though, price trends in copper are very sensitive to developments in China, which consumes around 40 percent of the world's copper. Copper is up about 12 percent this year as worries over the debt-strained euro zone have eased and the US economy has begun to pick up.
"We don't buy today's move as the beginning of a bullish phase, because we think the Chinese economy is still slowing down and at the same time the central bank is not yet willing to cut interest rates," said Gianclaudio Torlizzi, analyst at metals consultancy T-Commodity.
In other metals traded, aluminium closed at $2,130 a tonne from $2,126, while stainless-steel ingredient nickel closed at $18,225 from $17,825. Nickel has risen just 1 percent this year, making it the worst performing metal in the complex, though some analysts are now turning more optimistic, saying the selling has been overdone given changing fundamentals.
"Feedback from the recent days suggests Chinese buyers (are) rushing to restock at what are believed to be low prices. This is reflected in rising physical spot premiums over the last week or so," said Macquarie analysts in a note. "The LME nickel price is now trading below domestic prices in China, which makes buying imports more attractive, and currently prevailing price levels are trading below cash production costs for some nickel pig iron production in China."
In industry news for aluminium, state-run Aluminium Corp of China Ltd agreed to pay $926 million for a controlling stake in Mongolian coal miner SouthGobi Resources in a deal with mining billionaire Robert Friedland's Ivanhoe Resources. Elsewhere, battery material lead closed at $2,060 a tonne from $2,040, soldering metal tin at $23,250 from $22,800, while zinc, used in galvanising, ended at $2,008 from $2,001.
The latest LME data showed zinc stocks fell 550 tonnes but remained near their highest level in around 17 years at 896,825 tonnes. Analysts at Macquarie say zinc stocks sitting in warehouses not monitored by the exchange also are expanding as more of the metal is used for financing purposes.