Copper dipped on Wednesday as weak economic data from top consumer China dominated sentiment, but a weaker dollar and expectations of further stimulus helped limit the losses. Benchmark copper on the London Metal Exchange closed down 0.6 percent at $6,400 a tonne after modest gains in the previous session when the metal used in the power and construction sectors rose to a one-week high of $6,459 a tonne.
China's investment growth rate sank to its lowest in nearly 15 years as April data showed the economy still losing momentum. "There are a lot of worrying signs in the data. There's a real issue about getting the cash to where it's needed to generate growth and demand for base metals," VTB Capital analyst Wiktor Bielski said. "The real estate portion of the fixed asset investment number has been below the headline for quite some time, but the infrastructure element was higher, which will help support demand for metals."
Fixed-asset investment is a crucial driver of growth in China. It rose 12 percent in January to April, the slowest pace since December 2000 and compared with a consensus for a 13.5 percent gain. The weaker dollar and the cancellation of 25,000 tonnes of LME copper inventories over the past two days helped support the market, said Richard Fu, director of Asian commodities trading for Societe Generale Newedge in London.
"The cancellations show some investors might be bullish. Both the three-month futures and the spread in copper will go higher and I would see $6,800-$7,000 in the near future." Cancellations are notifications by owners of the metal of impending shipment from warehouses, reducing available metal. Also limiting losses was the dollar, which hit a more than three-month low against a basket of currencies after weaker than expected US retail sales.
"Base metals are getting support from the idea that the downside is limited," a trader said. "Stronger oil is another buffer, as that raises the costs of producing metal." That is particularly true for aluminium, where energy accounts for about 40 percent of production costs. But gains are likely to be capped by higher availability as aluminium comes out of financing deals, and metal is leaving LME-approved warehouses at a faster pace after the exchange changed its rules.
Queues to get aluminium out of LME warehouses in Vlissingen fell to 474 days in April from 510 in March and 560 in February. Aluminium failed to trade in closing open outcry activity and was last bid at $1,881.50, down 0.7 percent, while tin, also untraded, was bid at $15,675, down 1.4 percent. Zinc closed down 1.4 percent at $2,324, lead shed 1.5 percent to $2,024 and nickel fell 2.1 percent to $14,050.