Copper got only a modest boost on Monday from Chinese producers' plan to cut output as gains were capped by a strong dollar and concern over the economy of top metals consumer China. Nine large copper producers in China agreed at the weekend an initial plan to cut refined metal output by more than 200,000 tonnes in 2016, following moves already announced by China's nickel and zinc makers.
Many investors were sceptical that the output cuts would be implemented because of the past tendency in China to keep open loss-making operations to preserve jobs. "Capacity in China is as much social in many cases as anything else, but at $4,600 copper, it seems that even in China you can't fight economics forever. Some of these guys have costs at $6,000-$6,500," said Wiktor Bielski, head of commodities research at VTB Capital in London. "On the market, there's a 'We'll believe it when we see it' approach."
Three-month copper on the London Metal Exchange closed up 0.3 percent at $4,586 a tonne after a loss of 1.4 percent in the previous session. Copper prices, bumping along near six-and-a-half-year lows of $4,443.50 a tonne hit a week ago, ended November with a 10 percent loss, the biggest monthly decline since January. Most of the Chinese cuts by smelters in refined copper output will not come from reductions in mine output, said analyst Edward Meir at broker INTL FCStone in New York.
"The output that will be cut is apparently scrap-generated and will not be coming from the concentrate side, where treatment margins remain attractive," he said in a note. LME nickel failed to trade in closing open outcry activity and was bid up 1.2 percent at $8,880 a tonne, hardly making a dent in the 4.5 percent losses seen on Friday, while zinc finished up 0.9 percent at $1,562. Also pressuring base metals was a buoyant dollar index, which hit a 8-1/2 month peak, making commodities priced in dollars more expensive to buyers outside the United States.
The world's two biggest central banks are expected to move decisively in opposing directions this week, with the ECB almost certain to ease policy on Thursday and a US jobs report likely to seal the case for a Fed rate hike in December. "If you get a strong payrolls number this Friday, the market is probably going to move to fully pricing in a rate hike at this point," said Citi analyst Ivan Szpakowski in Hong Kong. Investors were also wary of data due on Tuesday that is expected to show that activity in China's manufacturing sector likely shrank for a fourth straight month in November. LME aluminium closed 0.8 percent lower at $1,446 a tonne, lead climbed 1.8 percent to end at $1,645 and tin added 0.3 percent to $15,050.
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