Copper held steady to higher in early London on Thursday, as Chinese buyers returned after Lunar New Year, with their focal point on physical markets for fresh signals of enthusiasm in the world’s top user of the metal before the second quarter kicks off, a period in which history tells the demand is usually strongest.
“We’ve started the year with the latest Chinese New Year in a long time, so that has subdued the physical market year-to-date,” said Daniel Morgan of UBS in Sydney.
“Now that’s behind us, we can start to get a read on what real demand is like. China should be roaring back to life. The price is cheap and they have a big grid build out coming up.”
China’s state power grid is a major copper buyer, which represents some 45 percent of global copper demand.
On the London Metal Exchange, Copper for delivery in three months had risen 0.8 percent to $5,820 a tonne by 0330 GMT, after falling for the third time in four sessions on Wednesday. Prices were moving toward a six-week peak of $5,846 a tonne scored on Tuesday.
The price is down 8.3 percent in 2015 and yesterday’s decline appeared as a gain in manufacturing activity was unable to reduce worries among investors that an economic slowdown will deepen in China, the world’s largest metals consumer.
While a flash Purchasing Managers’ Index compiled by HSBC Holdings Plc and Markit showed growth at Chinese factories in February, a gauge for new export orders in the report contracted for the first time since April and marked the lowest level not seen since June 2013.
“The sentiment is still pretty bad out of China,” Mike Dragosits, a senior commodity strategist at TD Securities in Toronto, said in a telephone interview. “Even though the PMI was a little better, we’re still hoping and waiting for more aggressive stimulus measures from the policy makers.”
The market lacks direction as top consumer China has a holiday shortened week, with markets likely to move up in mid-March.
Another factor providing support to metals was the dollar, which suffered slight decline in the wake of comments from Federal Reserve Chair Janet Yellen. The prices are moving upward on hopes of tighter than expected supply along with news that a drought in Chile is slowing down copper output, a water-intensive business. Chile is the world’s largest copper producing country and this news could lead to cut an expected surplus this year.
