LONDON (Thomson Financial) - Copper prices continued higher in early London trade after stockpiles of the red metal fell by almost 25 pct at the Shanghai Futures Exchange in the week to Nov 30, reigniting the prospect of increased Chinese demand.
Additionally, with market participants betting on a rate cut from the US Federal Reserve next week, hopes have been raised the world's largest economy could stave off recession, boosting the demand outlook for metals.
"The strong falls in copper stocks is a bullish development, although market talk of late has been expecting a fall," said BaseMetals.com analyst William Adams.
At 10.19 am, LME copper for three-month delivery was up at 6,976 usd per tonne against 6,880 usd at the close yesterday. Earlier, the metal hit 7,035 usd before running into profit-taking above the 7,000 usd mark.
Overnight, the SHFE reported copper stockpiles fell by 23.22 pct to 34,438 tonnes in the week to Nov 30. Chinese demand has been lower than expected thus far in the fourth quarter due in part to tightening credit conditions, previously high inventory levels and traders waiting for the price to dip to a more attractive level.
But with China's economic and construction boom continuing apace, most analysts are banking on renewed buying interest emerging from the world's largest consumer of the red metal.
"Expect copper prices to recover more after the Chinese New Year, which marks the start of the nation's buying season," said Fairfax analyst John Meyer.
Copper prices have been heavily pressured since mid-August when the credit crunch first took hold. Prices have declined by over 15 pct due to demand outlook fears in light of a possible economic slowdown.
Reduced buying from China at the beginning of the fourth quarter has been testing the theory that rapid growth in developing countries could take up the slack should the US economy falter.
Copper inventories at LME-monitored warehouse rose once again, continuing the recent trend. Inventories rose by another 600 tonnes to 189,200 tonnes, providing some of the physical evidence for lower recent demand.
In other metals, lead edged up to 3,015 usd per tonne, basis three months, from 3,010 usd, while nickel for delivery in three months was up at 27,000 usd against 26,950 usd.
Aluminium edged up to 2,505 usd per tonne, basis three months, from 2,504 usd, while three-month tin rose to 17,000 usd per tonne from 16,850 usd.
OXR
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