Copper rose on Monday, lifted by a strong euro and encouraging comments from top consumer China that boosted expectations of a recovery in demand, but persistent concern about the euro zone debt crisis capped further gains. London Metal Exchange (LME) three-month copper ended at $7,495 a tonne, up from the close of $7,445 on Friday when it rose 1.6 percent, its biggest one-day gain since July 13, after a better-than-expected US jobs report.
A seasonally slow period for industrial demand due to summer holidays in the northern hemisphere is keeping copper volumes in check and prices rangebound between $7,200 and $7,800 per tonne, where they have been stuck since late May. In a boost to metals prices, the euro rose against the dollar. A weak dollar makes commodities priced in the US unit cheaper for holders of other currencies.
Analysts said prices may be jolted out of this range if China's economy, as expected, picks up late in the third quarter or early in the fourth quarter and if there is no further marked deterioration in the euro zone's finances. Chinese industrial production for July, alongside retail sales and inflation data, is due on Thursday. Those figures will be important for the base metals market because China is the world's top consumer of most industrial metals, accounting for 40 percent of refined copper demand last year.
"The Chinese data due later this week has the potential to cause a significant shift in the mood. And relatively low volumes mean that it could get quite volatile," said Ross Strachan, economist at Capital Economics. Investors were reassured by the Chinese central bank's pledge on Sunday to intensify fine-tuning of monetary policy in the second half of this year and to improve credit policy to bolster the real economy, echoing earlier government commitments amid an economic slowdown.
Demand from China has been sluggish so far this year. The market is awaiting signs that appetite for the metal used in power and construction is picking up there. "Given the tax change, you could end up with a situation where there are outflows from China on a regular basis and that would suggest that the import number is not going to be very high, meaning the strong (import) numbers that we saw at the back end of last year are unlikely to be replicated in the near future," Strachan said.
Should domestic demand remain weak and overseas prices stay higher, exports from China may surge to as high as 180,000 tonnes in the second half of the year compared with just 9,336 tonnes in the same period last year, a sales manager at a large smelter in China said.
In a boost to sentiment, US and European shares rose as European and International Monetary Fund inspectors said Greece made progress on its debt bailout program, helping spur equities to build on gains from the previous session's rally driven by European Central Bank plans to help borrowers under pressure. European Central Bank President Mario Draghi said last week the bank would act only in co-operation with the euro zone bailout funds, and would require countries to ask for help first.
"After a massive move upwards it's not unrealistic to see something of a correction and the market is again having another look at what is going on fundamentally, and it's not as positive as what the market thought last week," said Commerzbank analyst Eugen Weinberg. Tin ended at $17,825 a tonne from $17,900 at the close on Friday, zinc ended at $1,849 from $1,840, lead closed at $1,891 from $1,895 and nickel closed at $15,805 from $15,625. Aluminium was untraded at the close, but bid at $1,878 from $1,860.