Copper steadied on Tuesday as signs of progress over the US debt ceiling showdown was not enough to convince investors worried about a growing surplus to bid the red metal higher for a fourth consecutive day. There were positive comments from US senators signalling that a last-minute deal to raise the debt ceiling and end the government shutdown could be reached. The Treasury is due to run out of money on Thursday.
Copper prices bounced last week from the bottom end of the $7,000-7,500 range in place since early August but momentum appears to be stalling, with risk appetite constrained until US lawmakers forge an actual deal on the US debt problem. "I think that at some point the market participants will see that copper at the current levels is not reflecting the fundamentals," said Eugen Weinberg, analyst at Commerzbank.
Weinberg added that signs of restocking in China should also have lifted copper from its current doldrums. Copper imports from China, the world's top copper consumer, jumped 18 percent in September, reversing from a fall in August, as importers boosted orders ahead of a seasonal pickup. Benchmark three-month copper on the London Metal Exchange edged up 0.07 percent to $7,260 a tonne, after gaining 0.8 percent in the previous session.
Weighing on copper, global miner Rio Tinto raised its forecast copper output for 2013 after a better-than-expected recovery at its landslide-hit US Kennecott mine and it posted record iron ore and coal output in the third quarter.
"Despite a 'steady-as she-goes' near-term growth trajectory now evident across the largest global economies, we are not seeing a corresponding push higher in base metal prices," said INTL FC Stone analyst Ed Meir. "This is because investors remain rightfully wary about... supply given the surpluses that are being projected for both this year and next."
On the upside however, data out earlier showed German analyst and investor sentiment rose unexpectedly in October, while on Monday, euro zone August factory output beat expectations, jumping 1.0 percent. Also, Chinese Premier Li Keqiang was quoted as saying on Tuesday that China, which consumes 40 percent of the world's copper, has the basic foundations to meet its major economic targets this year and the upward trend of the economy will continue.
The Chinese government has set an annual target of 7.5 percent growth for its gross domestic product in 2013. Improving global growth helped copper stocks on the LME fall by 5,150 tonnes to 503,425 tonnes, their lowest since early March, latest daily data from the exchange showed. Overall LME copper stocks have dropped almost 17 percent since September 3.
While a lot of these falls might be linked to improved demand from China, some investors are reluctant to place too much emphasis on a bullish Chinese growth outlook. Barclays said in a note that Chinese copper demand could lose some momentum into the year-end as power sector spending peters out, with September grid investment falling 15 percent in 2013's first year-on-year decline. In other metals, aluminium fell 0.37 percent to $1,863 a tonne in midday trading, with daily LME data showing stocks of the metal jumped by more than 20,000 tonnes to 5.34 million tonnes.
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