Copper prices rebounded slightly from 3-1/2 month lows on Wednesday but remained vulnerable to dollar strength, concerns about lacklustre demand from top consumer China and unrest in neighbouring Hong Kong. Benchmark copper on the London Metal Exchange (LME) ended at $6,680 a tonne, up 0.19 percent, having earlier fallen to its lowest level since June 13 at $6,637 in intraday trade.
Offering some relief to copper, the dollar pulled back slightly from a recent four-year high after data showed the pace of growth at American factories slowed in September from August. Earlier this session, poor factory readings from across much of Asia and Europe put the entire base metals complex save copper on the back foot, with nickel, tin and aluminium touching multi-month lows.
Still the dollar is expected to sustain its strength for the rest of the year as investors bet that largely robust US economic data will lead the Federal Reserve to tighten monetary policy. A strong dollar makes commodities priced in the US unit more expensive for holders of other currencies. "The LME group has been hit hard by the impact of both a stronger dollar and more recently, by growing concern about the massive demonstrations in Hong Kong. We think this is a serious issue and could outrank the Russian invasion of Crimea in terms of its potential impact on the markets," said Ed Meir, analyst at INTL FCStone in a note.
Pro-democracy protests in Hong Kong entered their sixth day, roiling global markets and posing one of the biggest political challenges for Beijing since it violently crushed pro-democracy protests in Tiananmen Square in 1989. Copper posted a 4.5 percent drop in September, its worst monthly performance since March. It shed close to 5 percent in the third quarter and is trading more than 9 percent lower so far this year.
Commerzbank analyst Daniel Briesemann said investors were likely to be disappointed going forward by a lack of aggressive stimulus measures to jump-start the Chinese economy, where the property sector - a major copper consumer - has been cooling. "I would be very surprised to see China stepping in with more broad-based stimulus measures. At least not in the way that is needed in order to achieve the 7.5 percent growth target." Chinese markets were shut on Wednesday for the start of a week of holidays.
Offering copper some support, workers at Freeport-McMoRan Inc's Indonesian unit are blocking access to the mine site to protest against the number of fatal accidents at one of the world's biggest copper mines. Meanwhile, Glencore-owned Mopani Copper Mines has suspended some of its planned $800 million Zambian copper mining projects after the government withheld $200 million in tax refunds.
Overall though, copper forecasts have pointed to rising output from new mines and renewed exports from Indonesia. Improving supply is likely to weigh on prices in the near term, Daniel Hynes of ANZ in Sydney said. However, he did not expect a huge surplus of copper, given the frequency of unexpected output disruptions such as ones announced earlier. In other metals, tin fell to a 14-month low in intraday trade at $20,100 a tonne. It later closed at $20,345 a tonne, up 0.17 percent. Refined tin shipments from Indonesia may fall to a one-year low of around 2,000 tonnes for September, industry officials in the world's top exporter said on Wednesday, with a self-imposed slowdown in shipments set to be maintained until mid-November. Nickel ended at $16,095 a tonne, down 1.26 percent, having earlier dropped to a six month low of $15,869. Aluminium ended at $1,923 a tonne, down 1.89 percent, having earlier touched a low of $1,921 - a level last hit in July. Zinc closed at $2,270 a tonne, down 0.79 percent and lead ended at $2,093 a tonne, down 0.29 percent.