Copper rises on China imports, Fed stimulus outlook

Copper extended last weeks advance into Monday after Chinese customs data showed that imports by the worlds biggest consumer rose by 18% in September. Speculations that the Federal Reserve will refrain from trimming its monetary easing program until 2014 supported the metals demand prospects.

On the Comex division of the New York Mercantile Exchange, copper futures for delivery in December rose by 0.21% to $3.306 per pound at 9:13 GMT. Prices shifted between days high and low of $3.311 and $3.282 per pound respectively. The metal fell by 0.1% on Friday but settled the week 0.6% higher after losing 1.5% in the preceding two five-day periods.

Copper extended gains on Monday after Chinas General Administration of Customs reported that the Asian nation imported 347 305 tons of copper in September, 32% higher than a month earlier. Inbound shipments of unwrought copper and products surged to the highest since March 2012, a report last week showed.

Richard Fu, director for Asian commodity trading at Newedge Group SA in London, said for Bloomberg: “The strong China import figures demonstrate the demand for the largest metal consumer is not bad at all. The physical demand is not bad at all.”

This comes after Chinas National Bureau of Statistics reported on Friday that the world’s second biggest economy grew at a faster pace in the third quarter both on annual and quarterly basis, indicating prospects for steady demand. Year-on-year, China’s economy expanded by 7.8% in the in the third quarter, meeting analysts’ expectations and outperforming the previous period’s 7.5% advance. Quarter-on-quarter, the Asian nation’s GDP grew by 2.2% from 1.7% in the previous three months and exceeded analysts’ projections for a 1.9% expansion.

The agency also reported that China’s industrial production rose by 10.2% in September from a year earlier, an inch lower than August’s 10.4% growth but beating anticipations for a fall to 10.1%. China’s retail sales also inched down and rose by 13.3%, compared to expectations for a 13.5% rise from the preceding month’s 13.4% advance.

Copper also drew support on speculations that the 16-day federal government shutdown in the U.S. likely caused enough harm to the fourth quarter economic growth that the Federal Reserve might defer tapering its monetary stimulus until 2014.

Richard Bernstein, CEO of Richard Bernstein Capital Management, said for CNBC last week: “An increasing number of people thought the economy was going to start hitting critical mass and that was all derailed by this thing. In the next month, we’re going to sort through the data and find out what’s going on. That could add a little volatility. I think the underlying trend is still positive, but it’s not like we have a booming economy… This is going to keep the Fed on the sidelines a little longer.”

A weak dollar underpinned the market. The U.S. dollar index, which measures the greenback’s performance against a basket of six major peers, traded at 79.76 at 9:13 GMT, up 0.09% on the day. The December contract shifted between day’s high of 79.80 and low at 79.68, near Friday’s 8-1/2 month low of 79.55. The U.S. currency gauge fell by 1% last week, a second decline in three. A weakening of the greenback makes dollar-denominated raw materials cheaper for foreign currency holders and boosts their appeal as an alternative investment.

However, the metal’s long-term outlook continued to be seen by analysts as bearish as China’s government seeks to shift economy growth form investment-driven to more consumption-based, resulting in a slower expansion. Expectations of a surplus next year has made the smaller markets of nickel, zinc and lead more attractive for investors.

Sijin Cheng, analyst at Barclays in Singapore, said for CNBC: “One problem for copper is that investors dont have a lot of conviction on where it will trade in the short term and no one is really positioned – demand might be okay but supply is going to rise.”