Comex Copper Hits Three-Month High On China Data

Jan 17, 2012 NEW YORK (Dow Jones)--Copper futures climbed on Tuesday to the highest price since late September on hopes that top consumer China would take steps to prop up its economy and boost metals demand.

China's rate of growth moderated during the fourth quarter, the National Bureau of Statistics said on Tuesday, but came in better than expected, the latest sign that global economic gloom toward the end of the year wasn't severe enough to derail the world's largest consumer of raw materials.

For copper traders, the data were just poor enough to support the view that Beijing would step in to prop up the country's economy. A report last week showing inflation in China eased in December gave leaders there more room to act, market watchers said. 

The most actively traded copper contract, for March delivery, rose 9.25 cents, or 2.5% to settle at $3.7295 a pound on the Comex division of the New York Mercantile Exchange, the highest settlement price since Sept. 21.

"All in all, the Chinese macro reports increase the odds that policy makers will soon shift towards an easier monetary stance," said INTL FCStone analyst Edward Meir, in a note.

China deployed a series of tight-credit policies last year to keep its economy from overheating. That limited the ability of companies to finance copper purchases, and helped knock prices down from last year's record highs.

China accounts for almost 40% of world copper consumption. The metal is used in everything from wiring and plumbing to consumer electronics, making prices particularly sensitive to shifts in the economic outlook.

"The global economic situation remains clouded, [but] the market is telling us the bad news has been priced in," traders with RBC Capital Markets said in a note.

Barclays Capital on Tuesday cut its 2012 price forecast for copper by 11%. The investment bank expects benchmark copper on the London Metal Exchange to average $9,000 a metric ton, or $4.08 a pound.

"There is a lot of concern about a blow-up in [China's] construction market, and that is a really important swing factor," said Gayle Berry, an analyst with Barclays Capital, in a note.

Copper's gains remain vulnerable to shifts in sentiment toward Europe's debt crisis, analysts said. The financial turmoil in the euro zone has kept investors wary of the growth-sensitive metal at times in recent months, as a credit crunch there could slam the global industrial economy.

Comex floor trading was closed on Monday for the Martin Luther King Jr. holiday in the U.S.

Copper settlements (ranges include electronic and pit trading):
Jan $3.7260; up 9.40 cents; Range $3.6295-$3.7485
Mar $3.7295; up 9.25 cents; Range $3.5940-$3.7590