Copper rose to a three-month high in London, wiping out this year’s drop, on speculation that China’s government may cut back on policy tightening after manufacturing slowed in the country.
A government-backed Chinese purchasing managers’ index was the weakest in more than a year, data showed on Sunday. Another PMI released yesterday by HSBC Holdings Plc and Markit Economics slid to 49.4 from 50.4 in June. The country is the world’s biggest copper consumer. Fifty is the dividing line between expansion and contraction.
“Policy easing is likely to have a positive impact on activity in the construction sector,” Daniel Major, an analyst at RBS Global Banking & Markets in London, said by telephone.
Construction accounts for a about quarter of copper demand, according to the Copper Development Association.
Copper for delivery in three months gained US$80.50, or 1.1 percent, to US$7,377 a metric tonne at 9:58am on the London Metal Exchange (LME), for a climb this year of US$2.
The contract reached US$7,427, the highest price since April 30, after adding 12 percent last month. Futures for delivery next month rose 1 percent to US$3.345 a pound on the Comex in New York.
All of the six main metals traded on the LME advanced, lifting aluminum, zinc, nickel and lead to the highest intraday prices since May. Tin reached the highest level since Sept. 1, 2008. Stockpiles of copper tracked by the LME shrank after declining for a fifth month in a row last month.
“These price gains, combined with sustained drawdowns of base metal exchange inventories, suggest that despite global double-dip fears, real commodity demand has not fallen off a cliff,” Major said in a report yesterday.
He was referring to the possibility that economies might re-enter recession.
“After a lull in the third quarter, we expect a rebound in construction activity in the fourth quarter,” Major said. “Improved sentiment from steelmakers and potential restocking in China are likely to support a seasonal pickup in commodity consumption in the fourth quarter.”
In India, Asia’s largest economy after Japan and China, manufacturing growth accelerated last month, HSBC and Markit said yesterday.
Figures due to be released in London would probably show that manufacturing expanded last month at a slower pace and construction spending fell for a second month in the US, the second-largest copper user, economists said.
Copper stockpiles tracked by the LME fell to 413,075 tonnes, daily exchange figures showed. They dropped 8.3 percent last month, the most since June last year. Inventories are down 18 percent this year, on course for the first annual drop since 2004. Canceled warrants, or bookings to draw metal from stockpiles, fell 5.1 percent to 31,025 tonnes yesterday.
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