Copper rose on Monday, after its biggest monthly gain this year in May, helped by dwindling stocks, seasonal buying interest in top consumer China and positive Chinese factory data. China's manufacturing activity expanded at the fastest pace in five months in May, reinforcing views that the world's second-largest economy is regaining momentum after a wobble at the start of the year.
That momentum coupled with seasonal buying in China and strong speculative appetite for copper has helped send London Metal Exchange stocks of the metal near their lowest in six years at 170,825 tonnes. Three-month copper on the London Metal Exchange, untraded at the close, was bid at $6,930, up 1.2 percent. The metal climbed 3 percent in May, the biggest monthly advance since December.
"Copper might have a bit further to go (near term). China is sweeping up every spare tonne of copper that's produced in the world (and) seasonal factors are always supportive when the surplus is not that large," said BNP Paribas strategist Stephen Briggs. But he added: "We won't stay above $7,000 a tonne for that long. The underlying surplus will have more of an impact on market sentiment later in the year (and) China can't go on absorbing this spare copper forever."
In industry news, China's north-eastern port of Qingdao has halted shipments of aluminium and copper due to an investigation by authorities, causing concern among bankers and trade houses financing the metals, trading and warehousing sources said. Metal imports have been partly driven in China as a means to raise finance, where traders can pledge metal as collateral to obtain better terms. In some cases the same shipment can be pledged to more than one bank, fuelling hot money inflows and spurring a clampdown by Chinese authorities.
Hedge funds and money managers have raised their net long or buy positions in copper to the highest since January, in the week to May 27, according to data from the Commodity Futures Trading Commission. Also helping support gains, the US manufacturing sector expanded in May at a faster clip than previously seen, an industry report showed. "Concerns about weakening demand were allayed by stronger US economic data, after a weather-related slowdown in the first quarter, and signs that China's economy was stabilising in the second quarter," Capital Economics said in a note.
But raising some concerns, China's home prices fell slightly in May from the previous month, two private surveys showed on Sunday, adding to fresh signs of cooling in a property market that has become a persistent drag on the broader economy in recent months. China's HSBC PMI for May is due on Wednesday, alongside other global indicators on manufacturing health, including in the United States, where a jobs report is also due on Friday.
Limiting gains in copper, South Korea's LS-Nikko Copper plans to restart its No 2 plant this week, a company spokesman said on Monday, after the smelter was closed for almost a month following an explosion that injured eight workers. Nickel prices closed up 0.5 percent at $19,350. Soothing worries about supplies of nickel, New Caledonia authorities said on Monday they had authorised a conditional restart of Brazil-based Vale's nickel mine operations, which were suspended more than three weeks ago after acid-tainted effluent spilled into a river.
Aluminium ended 0.6 percent higher at $1,850. The metal touched an intraday high of $1,860 for the second day in a row, its highest level since April 28. The light metal is still severely oversupplied but it has also gained a bit of traction this year from Indonesia's ore export ban, which impacts the price of the aluminium-making raw material bauxite.
"The magnitude of the increase in nickel prices is unlikely to occur in aluminium, (but) rising bauxite prices will, in our view, eventually place pressure on Chinese alumina/aluminium producers to cut production, supporting our medium-term bullish aluminium view," said Goldman Sachs in a note. In other metals, zinc closed 1.4 percent higher at $2,083, lead was up 1.3 percent at $2,123 and tin was up 0.7 percent at $23,375.
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