Expansion in China pulls up prices for copper

Gains were kept in check, however, by Europe’s unresolved debt crisis, clouding the outlook for the global economy and for metals demand this year.

Three-month copper on the London Metal Exchange rose 1.05 per cent to $7,680 a tonne in official midday rings from $7,600 at the previous close, having earlier hit its highest since December 12 at $7,710. Volumes were low at 5,515 lots, compared with the 30-day moving average of 16,383 lots.

The metal, used in power and construction, posted its first annual decline in three years in 2011 when it lost a fifth of its value on fears related to the euro zone debt crisis and the global economic slowdown.

Quantitative commodity research analyst Peter Fertig said: “Funds are now investing again, taking a bit more risk after a poor year, and this is supporting the base metals. (China data) is of course also a supporting factor,” said.

He added, however, that the outlook was shaky.

“It will depend on whether the debt crisis calms down or whether investors remains jittery, (which) would be negative for metals,” he said.

China’s official purchasing managers’ index (PMI) rose to 50.3 in December from 49 in November, indicating a slight expansion in business activity in the factory sector, but downward risks persist.

Meanwhile the euro and European stocks got a lift from news that German unemployment fell more than expected in December. The rate is now 6.8 per cent, its lowest level since the unification of Germany two decades ago.

A stronger euro makes dollar-priced commodities cheaper for European investors.

“China’s PMI number looks positive, better than most people had expected earlier on,” said Huang Yiping, chief economist for emerging Asia at Barclays Capital in Hong Kong.

“But caution remains in the market. The eurozone economy is declining, it’s in negative growth.”

Copper was underpinned by the fact that workers at Freeport McMoran Copper & Gold Inc’s Indonesia mine delayed their return to work at the world’s second-largest copper mine after a three-month strike over a labour dispute.