Copper prices fell on Thursday as markets fretted over demand in China, though expectations of further monetary stimulus in the country and firmer oil and equities helped to limit losses. Benchmark copper on the London Metal Exchange was untraded at the close, but bid down 0.3 percent to $4,575 a tonne. Oil was trading around $35 a barrel after Iran welcomed plans by Russia and Saudi Arabia to freeze output and an industry report showed a surprise drop in US inventories.
Demand from top consumer China has slowed alongside economic growth. Import data has shown some improvement, but confidence in future demand remains low. "I expect to see higher prices. Risk appetite is coming back, as witnessed by higher equities, and we are likely to see more monetary stimulus coming from China," said Commerzbank analyst Eugen Weinberg. "It's difficult to say what's going on with demand because of the New Year holiday in China."
China's Lunar New Year, on February 8 this year, normally brings industrial activity to a standstill for a couple of weeks in a country that accounts for nearly 50 percent of global copper demand estimated at around 22 million tonnes. Analysts typically use the average of January and February data to work out the strength or weakness of economic activity. "Metals in general are finding the upside easier at the moment as stock markets recover and hopes that Chinese demand may pick up on government stimulus," Triland said in a note.
"We have seen many of these relief rallies over recent years, however, so caution is advised for some time yet." Three-month aluminium traded down 0.1 percent at $1,517 a tonne, zinc gained 3 percent to $1,697 and lead fell 0.6 percent to $1,725. Rising stocks of lead in LME-approved warehouses, up more than 10 percent at 206,075 tonnes this week, are behind falling prices of the battery metals. Tin slipped 0.6 percent to $15,605 a tonne and nickel lost 0.6 percent to $8,350.
Citi estimates that only a handful of small nickel producers suspended operations last year, totalling 15,000 tonnes, or less than 1 percent, of global supply. "This is despite the fact nickel prices fell about 45 percent in 2015," the US bank said in a note. "The lack of meaningful supply response suggests sustained downside price pressure in the nickel space is highly likely."
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