London copper heads for biggest monthly gain this year

Bareksa.com - London copper was mostly unchanged on Friday amid worries about China's economy but was headed for its biggest monthly rise this year given peak seasonal demand, while nickel was set for a fourth monthly gain due to a ban on ore exports from Indonesia.

Worries resurfaced about the health of China's economy on Thursday after Beijing called on local governments to speed up their spending over the next month to boost activity, ahead of a key manufacturing gauge at the weekend.

China is the world's top consumer of most metals, and accounts for around 45 percent of refined copper demand.

"It suggests that things are perhaps a bit worse than the government is willing tolerate," analyst Lachlan Shaw of Commonwealth bank of Australia said.

Three-month copper on the London Metal Exchange edged up by 0.2 percent to $6,899.75 a tonne by 0709 GMT, after dropping 0.9 percent in the previous session.

However, dwindling supplies may lend support to prices later this year, if the dispute between global miners and Jakarta over taxes on copper exports continues to halt shipments, which could potentially flip the market into a deficit, Shaw said.

"Even if Chinese demand remains pretty soft, because you have got that supply issue in Indonesia, copper looks okay."

LME copper is up 3.8 percent for May - the biggest monthly advance since a 4.3-percent rise in December - trimming the year's losses to a little more than 6 percent.

The most-traded August copper contract on the Shanghai Futures Exchange slipped 0.2 percent to 48,640 yuan ($7,800) a tonne, but closed the month with a nearly 3 percent gain. The exchange will be shut on Monday for the Dragon boat festival.

Growth in China's manufacturing sector may have quickened slightly in May on an expected improvement in demand, a Reuters poll found, adding to budding hopes that the world's second-biggest economy may be stabilising.

Raising prospects for lower imports of metals ahead, China's banking regulator said on Friday it was stepping up oversight to prevent risks from some failed property developers from spreading into the broader financial system, but said overall risk from property loans was controllable.

LME nickel prices cut gains to turn flat, after New Caledonian authorities said they will allow mining giant Vale to restart nickel mining activities as early as Friday after suspending operations at the $6 billion plant more than three weeks ago due to an effluent spill.

Nickel prices traded at $18,874 a tonne, set for a monthly rise of 3 percent that would bring the year's total gain to more than 35 percent on supply concerns following Indonesia's January ban on ore exports.

Prices have lost about 12 percent from a 27-month peak of $21,625 hit on May 13, and analysts expect more consolidation before prices renew their advance after evidence that large orders for LME stocks were cancelled this week. (Source : Reuters)