Copper trims gains as traders digest China central bank move

Copper trimmed gains on Wednesday after touching a two week high earlier in the session as traders digested a move by China's central bank to add more liquidity to the economy in a bid to boost growth. Copper hit a two-week high of $5,755 a tonne earlier after China's central bank cut the amount of cash that banks must hold as reserves to help boost bank lending and combat a growth slowdown.
"Copper spiked by about $50 on this announcement, but the gains have since faded, telling us that the move may have already been discounted," INTL FCStone analyst Ed Meir wrote in a note. Also limiting gains were losses in oil, which deter those who invest in commodity basket funds, and gains in the dollar, which make dollar-priced metals costly for non-US investors.
Three-month copper on the London Metal Exchange ended up 0.44 percent at $5,705 a tonne, after posting its biggest one-day gain in 1-1/2 years on Tuesday. "This (China bank reserves cut) will give temporary support to the market. Whether or not that continues will depend on whether people believe it will be enough to filter into the wider economy," said Gayle Berry, metals strategist at Jefferies.
The metal used in power and construction is down 9 percent so far this year, having touched a 5-1/2 year low of $5,339.50 last week. It remains vulnerable to signs of rising supplies. LME copper stocks rose by 1,850 tonnes on Wednesday, and have risen by more than a third this year. In industry news, Pan Pacific Copper, Japan's biggest smelter, said it would not be taking term deliveries of copper concentrate from BHP Billiton after the two failed to agree on processing fees.
The failure to reach a deal reflects expectations of a continued global copper concentrate surplus. Higher fees encourage smelters to make more metal, putting more pressure on copper prices. In China however, copper producers are cutting demand for raw material scrap due to low margins at a time of weak metals prices, which could slow down growth in China's production of refined copper this year, industry sources said.
Aluminium ended down 0.63 percent at $1,879 a tonne, zinc closed down 0.70 percent at $2,140 a tonne and nickel ended at $15,100 a tonne, down 1.37 percent. Lead was last bid at $1,868 a tonne, up 0.97 percent and tin closed at $19,000 a tonne, up 0.26 percent.