September 5, 2012 / 2:19 AM / 8 years ago

Copper finds support on stimulus hopes ahead of ECB meeting

SINGAPORE (Reuters) - London copper was steady on Wednesday, supported by hopes that central banks will announce new plans to lift global growth following a boost to China’s railroad spending and ahead of a European Central Bank meeting on Thursday.

An employee checks a copper hose at the Sociedade Paulista de Tubos Flexiveis (SPTF) metallurgical company which manufactures flexible metal hoses, in Sao Paulo April 20, 2012. REUTERS/Nacho Doce

A string of worsening factory reports from top metals user China, the United States and Europe this week has darkened the outlook for commodities demand, but has also raised expectations that monetary officials will have to ease policy or boost spending, providing a year-end fillip to prices.

China has rolled out a series of plans for infrastructure spending, aiming to lift confidence that the government is committed to keeping economic growth from sagging further, upping its target for railway construction this year to 496 billion yuan ($78.14 billion), from 470 billion yuan.

The ECB is expected to outline rather than detail its strategy at a meeting on Thursday to keep the pressure on politicians to bring their deficits and debts under control.

“If there is an announcement of more free money from the U.S. or EU or government-mandated spending on construction in China, obviously this is going to put the wind behind copper’s sails,” said Matt Fusarelli, analyst at Australia-based consultancy AME Group. “Things are cooling down in China but we’re still expecting demand growth of 5 percent for copper, in part due to the rollout of electricity projects. We are expecting copper to outperform other metals over the next six months.”

Three-month copper on the London Metal Exchange was trading at $7,639.50 per tonne by 0350 GMT, up 0.1 percent from Tuesday when it ended down about 0.5 percent.

Copper hit a one-week high of $7,700 on Monday but has struggled to find momentum in recent months and has remained below $8,000 since mid-May, down from a 2012 peak of $8,765 per tonne in February.

The most-traded December copper contract on the Shanghai Futures Exchange slipped 0.16 percent to 55,930 yuan ($8,800) per tonne.

The global manufacturing downturn gathered pace in August, with output and new orders falling at the fastest in more than three years, a business survey showed on Tuesday.

This week, China’s official PMI fell below 50 for the first time since November, while a similar survey from Markit, sponsored by HSBC, showed activity shrinking at the fastest pace since March 2009.

A trader in China’s Guangzhou province said anticipation of further easing by Beijing had been supporting domestic prices. However, the trader said he saw copper prices falling in future as U.S. equity strength attracted investor funds and Chinese industrial demand growth moderated.

“We are less enamoured by base metals at this stage. Although an easing play should benefit the complex, any upside advance here will run headlong into the fact that Chinese demand is slowing markedly,” INTL-FC Stone said in a research note.

($1 = 6.3473 Chinese yuan)

Editing by Ed Davies and Chris Lewis

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