MELBOURNE, Mar 2: London copper briefly rose towards its highest in nearly two months on Monday after top metals user China cut interest rates at the weekend, but concern over fragile demand kept a lid on prices.
China’s central bank cut interest rates on Saturday, ahead of factory health readings that showed some worrying signs on growth, in the latest bid to support the world’s second-largest economy, as its momentum slows and deflation risks rise. Activity in China’s factory sector edged up to a seven-month high in February but export orders shrank and deflationary pressures persisted, a private business survey showed on Monday, underlying economic fragility that may need more policy support. China’s rate cut was not a bright sign for its economic health, said analyst Dominic Schnider of UBS Wealth Management in Hong Kong.
‘The message is we (will) prevent the hard landing and make sure conditions remain favourable, but we’re not there to boost the economy… The copper story was more supply-driven. I don’t think that demand angle is yet to kick in, so maybe people look to the beaten down metals to gain, given copper’s rally.’ UBS raised its 12-month copper forecast to $6,700 a tonne from $5,500 due to growing challenges to mine supply. Three-month copper on the London Metal Exchange edged up 0.3 percent to $5,915 a tonne by 0303 GMT, having earlier jumped to $5,941, within shouting distance of last week’s peak, which was the loftiest since Jan. 13. Prices closed little changed on Friday, when the metal logged its largest monthly advance in more than two years.
The most-traded May copper contract on the Shanghai Futures Exchange struck 43,140 yuan ($6,881), its highest since Jan. 13, before holding up 0.5 percent at 42,890 yuan. Hedge funds and money managers nearly eliminated their bearish positions in copper futures and options during the week to Feb. 24, data from the U.S. Commodity Futures Trading Commission showed on Friday.
Across other metals, LME zinc, LME aluminium and LME lead all climbed around 1 percent each, although lead was clambering off more than four-year lows plumbed on Friday. Lead prices have fallen due to ample mine supply and slowing growth in battery demand for electric bicycles. Weakness in China’s vast manufacturing sector, aggravated by high real borrowing costs and weak demand, appears to have driven the central bank to speed monetary easing to ward off deflation.
(AGENCIES)
Follow our WhatsApp channel