Copper prices rebounded further on Thursday from a six-year low hit in the previous session, as Beijing managed to halt panic selling in Chinese equities, though underlying worries about China's growth persisted. Beijing's increasingly frantic attempts to stem a stock market rout were finally rewarded as Chinese shares bounced around 6 percent, but sentiment towards copper remained cautious.
China consumes 45 percent of the world's copper. "We could see continued weakness in the coming weeks, with the Greek situation unresolved and concerns regarding growth from China, (though) there's a limit to how low copper can go because (global) growth will strengthen going into next year," Danske Bank analyst Jens Pederson said. Three-month copper on the London Metal Exchange closed up 2 percent at $5,632 a tonne. It gained 3.4 percent in the previous session, having sunk at one point to its weakest since July 2009 at $5,240.
Investors remained nervous about Greece as Prime Minister Alexis Tsipras raced to shore up political support for a tough package of tax increases and pension reforms due within hours if Athens is to win a new aid lifeline from creditors. "Metals direction will come down to how much the rout has hit broader sentiment in China. Where do the losses sit? Does this shake people's confidence in the economy and make them not spend? That will depend on how much longer this goes on for," said Dan Morgan, analyst at UBS in Sydney.
In other metals, tin added 1 percent to end at $14,295 a tonne. Indicating the market might be tightening, cash tin traded at a premium of $48 a tonne to the three-month price, after touching a premium of $54 on Wednesday, its highest since November. There were also indications of tightening in LME lead after the cancellation of 14,000 tonnes of inventories over the past two days.
LME stocks are cancelled when an owner of metal gives notice it is about to be shipped out of a warehouse, which means less availability. Analyst Vivienne Lloyd at Macquarie said the move appeared to be co-ordinated and may be similar to a bigger one earlier this year, when nearly 100,000 tonnes of lead stocks were cancelled, leading to a price rally. "It looks like someone's used the cancellations to squeeze the market. It seems like a mini-version of what happened in March."
LME lead closed up 1.6 percent at $1,815 a tonne after touching a three-week peak of $1,832. The discount of the cash to the three-month contract narrowed further to $6.50 a tonne, from $14 on Monday. Nickel surged 4.9 percent, the biggest one-day rise in eight months, to finish at $11,500 a tonne, extending Thursday's rally of more than 4 percent. Aluminium gained 1.7 percent to end at $1,700 a tonne while zinc added 1.3 percent to $2,010.
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