Copper steady in holiday-thinned trade, China outlook supports

SINGAPORE: London copper was stuck in a holding pattern on Tuesday with traders reluctant to take big positions due to a week-long holiday in top consumer China, while brightening economic prospects there and in the United States underpinned prices.

Metals have been bolstered by hopes that Chinese industrial buyers will return to the market next week, as economic growth has steadily improved since bottoming out in October.

But markets were quiet, with turnover of less than 200 lots of all three-month LME contracts, after nearly two hours of trade.

"I'm not expecting to see much in the markets this week because of the Chinese holiday, but generally we should see prices hold up," said Alexandra Knight, a Melbourne-based economist with National Australia Bank.

"It looks like there's a bit more optimism about Chinese buying coming back after the holidays," she added.

Three-month copper on the London Metal Exchange was little changed at $8,194.75 a tonne by 0247 GMT, after falling more than 1 percent in the previous session.

Copper last week rallied to its highest in four months at $8,346 a tonne. Although gains have petered off, prices are still up more than 3 percent so far this year.

The Shanghai Futures Exchange is closed this week, as are markets in Hong Kong, Malaysia and Singapore, although Japan and South Korea have reopened.

In wider markets, Asian shares were steady. Encouraging data from China late last week was lending support, but markets lacked momentum as investors await key events such as the US president's State of the Union address later in the day.

China's exports and imports surged and new lending soared in January as the first hard data of the year released last week signalled not only a solid recovery in domestic and overseas demand, but also the risk that inflationary pressures are building.

Brightening the picture for Chinese demand has been a revival in its top export markets - the United States and Europe.

Several of the world's leading economies are showing signs of improvement while the euro zone has stabilised even if France remains weak, an indicator compiled by Organisation for Economic Cooperation and Development suggested on Monday.

Supporting metals, the euro rallied from nearly three-week lows against the dollar on Monday after a European Central Bank policymaker said Europe's shared currency was not overvalued at current levels.

In the absence of other drivers, traders are expecting metals to gyrate with currency markets.

The Group of Seven nations are considering a statement this week reaffirming their commitment to "market-determined" exchange rates in response to heating rhetoric about a currency war, G20 officials said on Monday.

TIN EXPORTS TO DROP

An increase in January tin exports from Indonesia was driven by higher LME prices but shipments are expected to fall over the coming months as new purity standards are introduced and smelters upgrade ahead of a change of regulation, broker Triland said in a note.

Refined tin shipments from Indonesia, the world's top exporter, rose 5.4 percent in January to 9,154.71 tonnes from 8,689.20 tonnes in December.

Indonesia will increase its minimum purity requirements for tin ingot exports from July this year as it seeks to bolster its domestic processing industries.