Copper rebounded from six-year lows on Monday, after stronger than expected imports of the metal from top consumer China offset a faltering picture for the economy as a whole. A scramble by some bearish investors to cover short positions also fuelled widespread gains across the London Metal Exchange, a trader said.
China is under growing pressure to further stimulate its economy after data over the weekend showed another heavy fall in factory-gate prices and a surprise slump in exports.
"On a broad macro basis, the data suggests the economy softened into Q3, which is bearish for base metals as a whole," said Nicholas Snowdon, metals analyst at Standard Chartered in London.
"But at a copper-specific level, imports surprised on the upside and that in turn is supporting a tighter than expected outturn in the ex-China market, limiting the downside."
China's imports of unwrought copper rose nearly 3 percent in July to 350,000 tonnes compared with last year and were flat from the month before.
Three-month LME copper rebounded from a six-year low of $5,118 a tonne to an intraday peak of $5,323.50, a gain of 2.9 percent and the highest in more than a week.
Copper, which has shed around 16 percent so far this year, failed to trade in closing open-outcry activity and was last bid at $5,309 a tonne.
Copper also gained support from heavy rain and winds that battered the Chilean coastline and lead to the precautionary suspension of work at some mines in the top copper exporter.
Snowdon said the better-than-expected copper imports were not due to improved demand in China but because domestic smelters had been holding back supplies of metal.
The lacklustre demand conditions in China were expected to continue in the short-term, said strategist Daniel Hynes of ANZ in Sydney.
"But as we get into late Q3, we expect the underlying demand conditions will improve. If we get further stimulus measures from China it would suggest that import demand will hold up during the rest of the year."
Concern about demand conditions were evident from data showing hedge funds and money managers increased their bearish stance on COMEX copper futures and options to their highest in more than two years.
A drop in China's semi-manufactured aluminium exports in July may offer only a fleeting reprieve to global producers hammered by a supply glut, Citi said.
"We believe exports will remain weak in August, but falling Chinese prices are expected to re-open the export and see exports recover later in the year."
LME aluminium, also untraded in closing rings, was bid up 1.8 percent at $1,618 a tonne.
Nickel jumped 3.2 percent to close at $11,150, zinc closed 1 percent stronger at $1,881 a tonne, lead added 1.7 percent to finish at a two-week high of $1,758 while tin gained 3.1 percent to $15,775.
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