Copper rose to a one-week high in thin trade on Thursday, rebounding from falls in the previous session, as encouraging data from China reinforced signs of a recovery in the economy of the world's top metals consumer. Benchmark copper on the London Metal Exchange closed at $7,915 a tonne, up more than 1 percent from its $7,801 official price in the final ring trade of a holiday-shortened session on Monday.
The metal was on track for its strongest daily increase this month. A session high of $7,945.25 was its highest since December 19. Data from Beijing showed that profits earned by China's industrial companies jumped 22.8 percent in November from a year ago, accelerating from October's 20.5 percent. China accounts for about 40 percent of the global copper consumption. "It's not only this one data point; we have seen a series of data releases lately that were quite encouraging.
Everything points to the fact that the Chinese economy has probably hit the bottom and is now on the way to a very moderate acceleration. At least it's getting better, and this is good for cyclical markets like metals," said Credit Suisse analyst Tobias Merath. "But I think this rebound has to be seen in the context of the drop that we had just ahead of Christmas. That drop was not fully justified, and now market conditions are pretty thin and with a few orders you can move the market."
Traders cautioned as well that the thin holiday trade exaggerated price movement, while the physical market remained sluggish. "Trading volumes in the physical market are quite slow as traders are tight on cash near the year end," said a Shanghai-based trader. "I don't see any significant change on the macroeconomic environment or policy." Looking ahead, analysts said US budget talks are likely to dictate the direction of metals prices in coming weeks as investors wait to see whether the White House and Republicans can reach a deal to avert massive tax hikes and spending cuts as the deadline is only a few days away.
Failure to reach an agreement would risk tipping the US economy back into recession. "The complex remains touchy to the US fiscal cliff quickly approaching. With no deal as of yet, the market is concerned the recent strength in the US economy could reverse if the wave of higher taxes and lower spending becomes reality," RBC said in a note. "Unless a deal is done before the new year we expect volumes and activity to remain subdued over the next three trading sessions."
In industry news, workers at the world's biggest copper mine, Chile's Escondida, rejected an early pay offer by mine controller BHP Billiton, a union leader said on Wednesday. In other metals, tin closed at $23,400, up from $23,200 at the previous session's close.
Indonesia will increase its minimum purity requirements for tin ingot exports next year, a trade ministry official said on Thursday, in its latest move to bolster its domestic processing industries. Aluminium ended at $2,080, down from $2,092 on Monday.
Japan's Kobe Steel will cancel a plan to build an aluminium products plant in China amid uncertainties over the sales outlook to its major customers, such as Japanese automakers, the Nikkei business daily said on Tuesday. Zinc, used to galvanise steel, ended at $2,102 from a last bid at $2,090 on Monday, while battery material lead closed at $2,335 from $2,319. Stainless steel material nickel ended at $17,275 from $17,005.
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