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Copper Climbs as China Manufacturing Data Boosts Demand Outlook

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Dec. 31 (Bloomberg) -- Copper gained, extending an annual advance in London, as data showed that manufacturing in China expanded at the fastest pace in 19 months, boosting optimism that demand will improve in the world’s biggest user.

Metal for delivery in three months climbed as much as 1.1 percent to $7,970 a metric ton on the London Metal Exchange, the highest since Dec. 19, before trading at $7,954.50 as of 3:37 p.m. Shanghai time, rising 4.7 percent in 2012.

China’s Purchasing Managers’ Index was at 51.5 in December, according to a final reading from HSBC Holdings Plc and Markit Economics today. The figure was the highest since May 2011, and compares with a preliminary figure of 50.9 reported on Dec. 14.

“Today’s data confirmed market expectations of an improving macro environment in China,” Xu Liping, an analyst at HNA Topwin Futures Co., said from Shanghai. “But given the rising global supply, the copper price will find it difficult to rally much next year.”

Global output may gain 3.9 percent to 20.9 million tons in 2013, from a 2.3 percent rate this year, Barclays Plc said in a Dec. 14 report. Copper, used in pipes and wires, may advance to as much as $9,000 a ton in 2013, according to the median of 29 analysts’ forecasts in a Bloomberg survey published Dec. 18.

Lawmakers in the U.S., the second-largest copper user, struggled to reach a budget deal before automatic tax increases and spending cuts start to take effect from tomorrow. A failure to reach an agreement risks a recession, the Congressional Budget Office has said. The Senate will resume its session today.

Copper for April delivery closed 0.3 percent higher at 57,860 yuan ($9,290) a ton on the Shanghai Futures Exchange.

Metal for delivery in March gained 0.8 percent to $3.6195 a pound on the Comex in New York. Net-long positions, or wagers on rising prices, held by funds were 14,988 futures and options contracts as of Dec. 25, compared with 24,531 a week earlier, the highest since August 2011, according to the U.S. Commodity Futures Trading Commission.

On the LME, aluminum, nickel and zinc gained, while lead declined. Tin fell 0.3 percent to $23,250 a ton, poised for the biggest rise this year among base metals, gaining 21 percent.

To contact Bloomberg News staff for this story: Helen Sun in Shanghai at hsun30@bloomberg.net

To contact the editor responsible for this story: Jake Lloyd-Smith at jlloydsmith@bloomberg.net

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