Copper moves higher

Copper rose on Monday as strong imports from top consumer China boosted optimism about the outlook for demand, but further gains were capped by concerns about the fiscal impasse in the United States. Benchmark copper on the London Metal Exchange closed at $7,255 a tonne from a close of $7,200 on Friday. China's copper imports jumped 18 percent in September, reversing from a fall in August, as importers boosted orders ahead of a seasonal pickup.
Risk appetite, however, was restrained by concerns the United States may default on its debt as lawmakers struggled to reach a deal on raising its borrowing facility ahead of a deadline this week. US Senate negotiations to bring the fiscal crisis to an end showed signs of progress, but there were no guarantees the federal government shutdown was about to end.
"The budget talks, which are heading towards the final chapter of this long drawn-out saga, could even fail in this phase as well, as there are still tensions between the Democrats and the Republicans over the sequester cuts," Naeem Aslam, chief market analyst at Ava Trade, said. "The upside (for copper) is capped by the resistance of $7,400, which is also considered as psychological level. The next major resistance that we see is at $7,800," he said.
The metal used in power and construction fell nearly 1 percent last week, the biggest weekly loss since mid-September, and is down more than 9 percent this year as the market remains uncertain about the strength of the global economic recovery. Some analysts say copper imports into China may ease in the coming months as the world's second-largest economy grapples with the effects of weak global growth. A week-long holiday in China at the beginning of October is also likely to distort copper import data for this month.
"Going forward, it does feel like the copper restocking cycle is maturing," analyst Joel Crane of Morgan Stanley in Melbourne said. "I'd expect imports (from China) to ease in October because of the holiday, but even with fairly weak external demand I don't think they're going to drop off a cliff, especially because regional inventory is low," he added.
Morgan Stanley saw copper trading at an average of $7,165 a tonne in the fourth quarter. Australia's third-largest copper miner Oz Minerals Ltd cut its 2013 copper production target for the second time this year due to mine repair work. Aluminium closed at $1,870 from a last bid of $1,881 on Friday, zinc at $1,929.50 from $1,917, nickel at $14,010 from $13,920, tin at $23,325 from $23,475 and lead at $2,131 from a last bid of $1,917.