Copper prices rose on Wednesday as the lower dollar triggered a flurry of fund buying, while the market waited for clues to the strength of demand, particularly in top consumer China. Traders say producers and consumers of industrial metals are mostly absent from the market, even though many think prices bottomed in January, when benchmark copper on the London Metal Exchange hit $4,318 a tonne, its lowest since May 2009.
They have left the field wide open for funds that buy or sell on signals from models using numerical relationships; one of these involves the US currency, which when it falls makes dollar-denominated commodities cheaper for non-US firms. "Directional trading has slowed. Copper is in a technical range, there's support at $4,620," said Steve Hardcastle, head of client liaison at Sucden Financial. "The physical market is slower, you are starting to see copper stocks rise."
Copper ended up 0.5 percent at $4,708 a tonne. It hit $4,663.50 on Tuesday, its lowest since April 12. Stocks of copper in warehouses approved by the LME are up nearly 15 percent at 161,625 tonnes since early April. In warehouses monitored by the Shanghai Futures Exchange inventories are down from record highs in the middle of March, but at above 310,000 tonnes they are still up about 75 percent since the start of 2016. Traders and analysts are waiting for Chinese industrial production, investment and property market data for April to gauge the potential strength of demand over coming months.
"China concerns have once again emerged, while negative commodity sentiment has been aided by Chinese bourses' attempts to constrict speculative flows," Citi analysts said in a note. "Manufacturing activity was boosted by ... new credit in the first quarter, pushing both state and private manufacturing PMIs above 50 in March. However, April's PMI retreat suggests the effects of such credit easing measures were short-lived."
Three-month aluminium was up 0.6 percent at $1,564 a tonne, lead gained 1.5 percent to $1,774, tin rose 0.5 percent to $17,250 and nickel added 2.1 percent to $8,885. Zinc was the outperformer with gains of three percent to $1,903 from an earlier $1,914.50, its highest since May 3. The metal used to galvanise steel is up about 18 percent so far this year on worries that mine closures will create shortages.