Reuters reported that London copper rose supported by hopes of more monetary stimulus from the US. Federal Reserve after weak retail sales data added to evidence the world's largest economy was slowing.
Investors are awaiting Fed Chairman Ben Bernanke's Congressional testimony for clues on whether the central bank will launch further easing measures to shore up the economy. Three month copper on the London Metal Exchange inched up 0.2% to USD 7,705 per tonne by 0734 GMT after falling slightly by 0.1% in the previous session.
A copper buyer based in Shanghai said that wth Bernanke starting his report tonight, investors are cautiously optimistic of more quantitative easing by the Fed and these sentiments are supporting base metal prices.
Hopes for more stimulus by the Fed were further stirred by a forecast downgrade of global economic growth by the International Monetary Fund and a third consecutive monthly fall in US retail sales in June.
Bets on more aggressive monetary action in the United States were evident in record low US government bond yields on Monday, which analysts said was a sign that people were starting to price in more easing.
The most active November copper contract on the Shanghai Futures Exchange touched a two month high of CNY 56,620 but pared gains to close the day in the red at 55,930 yuan.
Mr Li Rong analyst of Great Wall Futures said that "Shanghai base metals started falling in the afternoon as some investors liquidated metal futures to cover their losses in Dalian soybean futures. Shanghai copper was also under technical pressure after breaching the CNY 56,000 level which helped push prices down.”
Beyond the short term, expected stimulus policies by various governments are expected to boost copper prices from current levels. But experts believe cash prices for copper will average USD 8,003 per tonne in 2012 lower than last year's average cash contract on the LME at USD 8,812 per tonne. This was hardly surprising as most downstream copper industries in China are still experiencing weak demand for their products.
Since end of April, our orders have fallen around 10% to 15% compared to the same period last year. We will definitely be looking out for more aggressive spending programs by the government. Hopefully these will boost our sales.
The country's Statistics Bureau said that in industry news, China's refined copper output in June rose 11.6% on the year and 7% on the month to 518,000 tonnes.
Market players said that this was due to smelters betting on improved demand in the second half of the year and Chinese copper producers delivering into LME warehouses in Asia.
One Shanghai based trader said that "Big producers like Jiangxi Copper have been delivering into LME warehouses in Asia for the past two months to take advantage of higher LME prices. We've heard the government has waived export duties on these deliveries."
Besides enjoying an export duty waiver, Jiangxi Copper has also been switching their own output with companies that are supposed to deliver bonded goods into the domestic markets. Jiangxi would deliver their own output to domestic buyers of bonded material in return for the same tonnage in bonded material for direct export.
Source - Reuters
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