Copper bounces as China investment news spurs short-covering

Copper prices bounced on Thursday to snap a four-session losing streak, as bearish speculators reversed their positions after news about fresh investment in top metals consumer China.

Benchmark copper futures CMCU3 on the London Metal Exchange gained 1.9% to $8,406 a tonne by 1100 GMT after touching a two-month low on Wednesday over worries about slowing economic growth and demand.

China’s southern manufacturing hub of Guangzhou plans 1,722 projects in 2023 worth more than 6.5 trillion yuan ($945 billion), state media CCTV reported on Thursday.

“Knowing what the year will bring after two days of trading is virtually impossible, so there’s quite a lot of caution regarding getting too stuck with a position that may not end up being the right one,” said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.

“If you started out having a handsome profit on a breakout, then a fundamental piece of supportive news is enough for those sellers to have a rethink.”

Prices are unlikely to make much progress on the upside, however, with underlying concern about rising COVID-19 cases in China and weakening global industrial activity, he added.

The 200-day moving average at $8,476 would likely cap any moves higher, Hansen said.

The most-traded February copper contract on the Shanghai Futures Exchange SCFcv1 dropped as much as 1.8% to 63,850 yuan ($9,289.98) a tonne on Thursday, its lowest since Nov. 4, 2022. It ended down 1.2% at 64,290 yuan a tonne to log its fifth straight daily loss.

Analysts said copper would likely remain trapped in a range ahead of China’s public holiday to celebrate its New Year from Jan. 23 to Jan. 27, when financial markets are closed and economic activities are usually subdued.

Among other metals, LME aluminium CMAL3 rose 1.6% to $2,303, zinc CMZN3 added 0.7% to $3,012, tin CMSN3 climbed 1.2% to $25,390, but nickel CMNI3 dropped 2.7% to $28,965 and lead CMPB3 fell 0.5% to $2,257.
Source: Reuters (Reporting by Eric Onstad Additional reporting by Mai Nguyen in Hanoi Editing by Vinay Dwivedi)