China demand optimism limits copper’s losses

LONDON — Copper prices slipped on Wednesday due to profit taking after the recent rally to three-year highs but expectations of growing demand in top consumer China helped limit losses.

The market is looking for announcements from China’s twice- a- decade Communist Party Congress, which started on Wednesday, to boost manufacturing and construction activity and fuel demand for base metals.

“People are expecting major social building initiatives and all sorts of explosive announcements,” said Marex Spectron’s global head of analytics, Guy Wolf.

“The scope for disappointment is relatively high. It would be reasonable to expect a correction in the short term, but the big picture is a long-term bull market… There is some evidence of investment money coming back into commodities.”

Benchmark copper on the London Metal Exchange (LME) closed down 0.50% at $ 6,990 a ton. Prices hit $7,177 on Monday, their highest since July 2014.

Chinese President Xi Jinping opened the Congress with a pledge to build a “modern socialist country” for a “new era” that will be proudly Chinese, steadfastly ruled by the party but open to the world.

The market expects a copper market deficit this year.

That was reinforced by the International Copper Study Group, which has said the market saw a 75,000-ton deficit in the first half of the year.

“While global demand is solid, we only see a limited risk of undersupply with mine production recovering from disruptions earlier this year,” Julius Baer analyst Carsten Menke said.

Funds’ net long copper positions on the LME at 61,302 lots, or more than 1.50 million tons, have risen about 13% since Oct. 2 and is at the highest level since the middle of September.

Prices closed down 0.90% at $ 2,120. Downward pressure comes from perceptions that the cuts in top producer China may be less severe than previously expected.

China’s campaign to reduce air pollution and whittle down excess production is seen reducing aluminum smelting capacity by about a 10th by the end of this year.

Cuts at major producer China Hongqiao Group are likely to be far less than the previously mooted 30%.

Prices up 1.20% at $ 3,127, six percent below the 10- year high above $ 3,300 hit earlier in October.

Among other industrial metals, lead rose 1.20% to $ 2,522, tin eased by 1.30% to $ 20,080 and nickel ceded one percent to $11,645. —