Copper off 2-week low on China demand hopes, Greece deal eyed

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Forexpros - Copper futures regained strength on Wednesday, easing off a two-week low amid indications demand from top consumer China will remain strong, but gains were limited as investors continued to focus on talks surrounding Greece's debt swap deal ahead of Thursday's deadline.

On the Comex division of the New York Mercantile Exchange, copper futures for May delivery traded at USD3.777 a pound during European morning trade, gaining 1.05%. 

It earlier rose by as much as 1.25% to trade at a session high USD3.783 a pound. Prices fell to USD3.725 on Tuesday, the lowest since February 17. 

Copper prices regained strength after the chairman of China's second largest copper producer said the Asian nation's copper demand will grow by at least 6% in 2012.

Speaking on the sidelines of the National People's Congress in Beijing, Wei Jianghong, chairman of Tongling Nonferrous Metals, said he saw copper demand from China's power sector staying strong this year. 

Tongling's outlook comes a day after Jiangxi Copper Company, China's biggest copper producer forecast a 7% increase in China's demand for the industrial metal.

Jiangxi Chairman Li Yihuang said that he expects market fundamentals for the metal to remain 'healthy' this year.

Li said that the company saw no signs yet of slowdown in China's copper consumption, but added that copper prices should remain volatile because of global economic instability.

China is the world's largest copper consumer, accounting for almost 40% of world consumption last year.

The industrial metal is sensitive to the economic growth outlook because of its widespread uses across industries. The metal is used in the construction of buildings, power generation and the manufacture of consumer electronics.

But gains were limited as markets remained jittery ahead of the March 8 deadline for bondholders to join the agreement under which they will exchange their existing Greek government bonds for new paper in a swap deal.

There is uncertainty over how much participation Greece will see for its bond swap. The Greek government has set a minimum 75% participation rate to proceed.

A failure to agree on the swap would put the country back on the brink of a messy sovereign debt default and could reignite fears about the collapse of the single currency.

Europe as a region is second in global demand for the industrial metal. Prices have tracked investor sentiment toward the euro zone's debt crisis in recent months.

Meanwhile, in fundamental news, Chile's Mining Minister Hernan de Solminihac said earlier that massive investment in Chilean mines will increase the country's copper production by nearly 50% in the next decade and dilute prices in two years.

"We think prices will remain high this year and next, because fundamentals will remain the same, but after two years, they'll come down to around USD3.00 per pound" after factoring in new production, according to Mr. de Solminihac.

Chile is the world's top copper producer, accounting for nearly one-third of global production. State-owned copper miner Codelco is the world's biggest copper company.

Elsewhere on the Comex, gold for April delivery rose 0.35% to trade at USD1,678.25 a troy ounce, while silver for May delivery gained 0.95% to trade at USD33.08 a troy ounce.


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