Copper edged higher on Monday on hopes of more stimulus from China, and after Greek conservative parties topped opinion polls, helping calm fears over contagion should Athens default on its debt and leave the euro.
A conservative victory on June 17 would raise the odds that Athens will form a government that would agree to harsh bailout terms by the European Union and the International Monetary Fund, enabling it to stay in the currency club.
But risks remain high, as Spain is said to be considering issuing more debt to recapitalize its fourth-largest lender, Bankia.
In China meanwhile, copper got support from news that Beijing may subsidize vehicle purchases in rural areas, the latest of a number of moves signaling the Chinese government’s attempts to stimulate the economy.
Three-month copper on the London Metal Exchange rose 0.5 percent to trade at $7,675 a tonne by 1433 GMT from $7,639 on Friday, with volumes expected to remain light given public holidays in Europe and the U.S.
Copper prices have dropped more than 8 percent this month alone, with demand prospects glum not just in Europe, but in China, which accounts for around 40 percent of the world’s copper consumption.
“The market is taking a breather after two weeks of heavy losses. There is a bit of optimism as polls showed the pro-bailout party is ahead in Greece but I am skeptical,” said VTB Capital analyst Andrey Kryuchenkov. “I can’t see a sustained recovery. My guess is that copper is going to hold at $7,000-7,800 until there is more news about Greece and more economic data.”
Surveys showed on Saturday Greece’s conservatives have regained an opinion poll lead that would allow the formation of a government committed to keeping the country in the euro zone.
But the euro zone remains a wild card to many investors, who worry that debt problems there will worsen and further crimp the region’s demand for copper and other commodities.
German central bank chief Jens Weidmann dismissed French-backed calls for the use of joint euro bonds to boost economic growth inEurope. He said in an interview in French newspaper Le Monde that “this debate irritates me a bit.”
In China, a Qingdao-based copper buyer said until more details were released on various investments and subsidies by Beijing, investors would wonder how these would stimulate domestic consumption in the longer term.
“The earmarked investments and subsidies will create more demand for metals in the short term, but it remains to be seen how these projects will stimulate domestic consumption and help China restructure its economy, and if it will improve liquidity or just increase debt held by local governments,” he said.
On a fundamental level though, copper remained in short supply, with the global market in a 110,000-tonne deficit in February, the International Copper Study Group (ICSG) said last week.
In industry news, the incoming CEO of Codelco has signaled there will be no change in the Chilean state copper giant’s attitude toward its right to acquire 49 percent of Anglo American Plc’s assets in south-central Chile.
Also, the world’s No. 3 copper mine, Chile’s Collahuasi, is gradually resuming mining operations following the accidental death of a worker late Saturday, spokeswoman Bernardita Fernandez told Reuters on Sunday.
In other metals, soldering material tin was at $19,751 a tonne from $19,750, while zinc, used in galvanizing, was at $1,905 from $1,908.50.Battery material lead was at $1,943.75 versus $1,950, aluminum was at $2,019.50 from $2,013.50, while stainless-steel ingredient nickel was at $17,060 from $17,050.Source: Reuters