SYDNEY: London copper edged down on Friday amid expectations of swelling supply, but prices were headed for the biggest weekly rise in two months on signs of demand recovery in top consumer China.
In China, copper demand has shown a slight improvement this month on the back of orders from manufacturers ahead of the Christmas and Lunar New Year sales season, traders said. That, and tentative signs of economic growth have broadly provided some support to metals prices.
"We have had some positive drivers in the past few days. Better-than-expected earnings in the United States, Germany's PMI.. Chinese data that was a bit
better than expected," said analyst James Glenn of National Australia Bank in Melbourne.
"Metals that have slightly more positive fundamentals like zinc and aluminium have been coming back in the last few days. But with copper there is a chance for a substantial surplus next year
. that's probably weighing a little bit."
Three-month copper on the London Metal Exchange had slipped 0.2 percent to $6,680 a tonne by 0227 GMT, after gaining around 1 percent in the previous session. LME copper prices were set to advance by 0.6 percent for the week in their biggest weekly rise since late August.
Euro zone businesses performed much better than forecasters expected this month and China's vast factory sector grew a shade faster, but US manufacturing activity sputtered to its slowest since July, underscoring the uneven nature of the post-crisis global economy.
In China, average new home prices in 70 major cities fell 1.3 percent in September from a year ago, marking the first annual drop in nearly two years and stoking worries that falling property prices would drag on economic growth.
The most-traded January copper contract on the Shanghai Futures Exchange trimmed overnight gains of half a percent and was at 47,160 yuan ($7,705) a tonne, up 0.2 percent. Prices were on track for a more than 1 percent weekly rise, the strongest week since August.
Spanish smelter Atlantic Copper aims for record production this year and expects increased capacity at copper smelters globally to absorb the output from mines and keep the concentrates market in balance through 2017.
Across other metals, LME aluminium and zinc were set to close the week higher, but by less than half a percent. LME aluminium was trading below a one-month high of $2,015.75 hit midweek, as supply remained tight after a swathe of capacity closures. Shanghai zinc climbed 1 percent, underpinned by a shortfall in China's domestic supply of the metal.
Physical zinc in China is trading at a high premium over the Shanghai December contract "which probably gives support to the assumption that supply is tight", an analyst at a hedge fund in China said, adding that LME zinc prices were still too high to encourage imports.
Shanghai zinc stockpiles have sunk to the lowest in five years, while the futures curve was showing signs of stress, with cash prices having traded at a premium against third month prices for the past month.
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