Copper futures rise on short covering, remain close to 44-month low

Copper rose on Monday after posting its worst weekly performance in 11 months as investors were attracted by the lower prices and traders covered short orders, but the red metal remained close to Wednesdays 44-month low due to the persisting tension in Ukraine. Concerns that China might not be able to reach its first-quarter economic growth target continued to pressure the market.

On the Comex division of the New York Mercantile Exchange, copper futures for delivery in May rose to $2.9735 per pound by 12:46 GMT, up 0.78% on the day. Prices shifted in a daily range between $2.9215 and $2.9860 a pound. The red metal rose by 0.9% on Friday but settled the week 4.6% lower, the biggest drop in 11 months, having plunged to a 44-month low of $2.9080 on Wednesday.

The market recovered some of its losses on Monday as market players locked in profits from the recent price slump and covered their short bets as the metal fell for a third week, while some buyers were lured by the low prices. According to analysts, purchases from industrial consumers also provided with some support.

However, prices remained close to last weeks 44-month low as the persisting tension in Ukraine and recurring signs of weakness in the Chinese economy, the worlds biggest consumer of the industrial metal, dimmed demand prospects.

The US and European Union warned Moscow not to annex Crimea after yesterday’s referendum, according to which 97% percent of voters backed the pro-Russian local government’s decision to separate from Ukraine and join Russia. While the United States, European Union and the Ukrainian government deemed the referendum illegal, Russia said it was in consonance with international law.

President Barack Obama authorized Treasury Secretary Jacob J. Lew to impose financial sanctions which may include freezing assets or prohibiting American companies or individuals from doing business with people or entities who threaten Ukraine’s security. European Union foreign ministers were meeting today in Brussels to discuss measures including assets freezes and travel bans.

James Marks, head of global metals at Xconnect Trading Ltd. in London said for Bloomberg: “Sanctions are one thing, what the market will not want to see is conflict. Any shots fired, etc., are likely to see a macro sell-off.”

According to data by the US Commodity Futures Trading Commission, hedge-fund managers and other large speculators raised their bearish bets in Comex copper in the week ended March 11th, with the short contracts outnumbering long positions by 10 473.

The market remained under pressure after recent downbeat economic figures from China, which accounts for around 40% of global consumption, spurred fears the Chinese economy might steer away from Premier Li Keqiangs 7.5% annual growth target.

The National Bureau of Statistics reported last week that the Asian nation’s industrial production expanded by 8.6% in the January-February period, compared to a 9.7% growth during the same months a year earlier. Analysts had expected a minor slowdown to a 9.5%-expansion.

At the same time, retail sales rose by 11.8% year-on-year, also trailing expectations for a minor retreat to an expansion of 13.5%, compared to last year’s 13.6% growth.

This comes after China’s statistics agency reported that the Asian nation’s exports surprisingly contracted by 18.1% in February on an annual basis, confounding analysts’ expectations for a 6.8% expansion following January’s 10.6% growth.

Chunlan Li, an analyst at at consultancy CRU in Beijing, said, cited by CNBC: “Due to the poor economic performance in January-March, the GDP growth rate for the first quarter might be not able to meet the governments requirements, and we might see policies that act as support for prices in future.”

The market was also rattled after Chinas first bond default last week arose fears financiers might dump the metal as it is used as collateral for loans.