Reuters reported that London copper was steady eyeing its biggest quarterly in almost 2 years as jitters over liquidity in the US and China tarnished the allure of commodities against a backdrop of fitful global economic growth.
Copper prices have been hurt this quarter by concerns that an impending start by the United States to scale back its bond buying could impede economic recovery and cut capital available to investors.
Adding to the liquidity jitters this month, a spike in short term lending rates China as industrial demand enters a softer season in the Q3 have only amplified worries over demand in the top two commodities consumers.
Mr Sijin Cheng analyst of Barclays in Singapore said that "It's not just a roll back of stimulus but a sense that potentially the Chinese government may be taking bigger risk than they realize by standing back and not really doing anything when the intrabank market is having a melt down."
Three month copper on the London Metal Exchange dipped to USD 6660.50 per tonne, near the 3 year low of USD 6,602 per tonne hit on June 25 before paring losses to trade barely changed at USD 6,760 per tonne by 0240 GMT.
China's central bank is squeezing funds out of the money market, forcing banks to borrow money at historic interest rate levels but the manoeuvre appears to have been calculated to have limited impact on the real economy.
Also undermining sentiment, growth in China's vast factory sector may have stalled in June as domestic and external demand weakened boding ill for broad economic prospects in the H2. China's official Purchasing Managers' Index is due July 1st 2013. China accounts for some 40 percent of refined copper demand.
Mr Cheng said that "In terms of copper demand we're entering a season of relative softness in China. From China side I see copper more likely to soften sequentially rather than strengthen. The most traded October copper contract on the Shanghai Futures Exchange reversed early losses to trade at CNY 48,670 per tonne up 0.23%.”
