LONDON (Reuters) – Copper prices rose on Wednesday due to profit-booking on short positions after hitting a 5-1/2-month low on worsening demand prospects in top consumer China, rising at London Metal Exchange’s authorized warehouses. Stocks (LME) and the rise of the dollar.
* Benchmark copper on the LME was up 1% at $8,207 a tonne in official trade. The industrial metal, used as an indicator of economic health, had earlier hit $8,088.50, its lowest level since Nov. 30.
* “There is some short covering, but the demand picture remains weak,” said Robert Montefusco, a broker at Sucden Financial, adding that base metals were reacting to macroeconomic factors such as US interest rates and the dollar.
* The latest data to reinforce the weak outlook for base metals was China’s industrial production, which rose 5.6% in April from a year ago, up from 3.9% in March but below the 10, 9% consensus forecast.
* Copper stocks in LME warehouses, at 86,625 tonnes, have risen 70% in the last four weeks, to their highest level since January.
* Risks of a US debt default and safe-haven asset purchases as well as traders’ reduced bets on an imminent interest rate cut by the Federal Reserve boosted the dollar.
* A rise in the US currency would make dollar-denominated metals more expensive for holders of other currencies, which would reduce demand.
* In the aluminum market, a large number of LME warrants were concentrated and a small number of positions representing 20-29% of open interest, i.e. the number of outstanding contracts that come to maturity or are renewed at the time of liquidation.
* Expecting to liquidate the short position, a premium has been created to buy aluminum tomorrow and sell it the day after tomorrow, known as Tom-Next. On Tuesday, the premium rose to $11.30 a tonne, the highest since April 14. It was located at $8.
* Three-month aluminum was up 0.6% at $2.273; Zinc was up 1.5% at $2,530; Lead rose 0.7% to $2,059; Tin rose 1.1% to $24,800; And nickel rose 1.2% to $21,375.
