February 15, 2016 / 2:13 AM / 4 years ago

METALS-London copper, nickel surge as China reopens

* Speculators cut bearish copper position - Comex data

* U.S. markets shut for holiday

* Coming up: China trade data for Jan (Adds comment, detail; updates prices)

By Melanie Burton

MELBOURNE, Feb 15 (Reuters) - London copper and nickel surged on Monday after China markets reopened following a week-long holiday, and investors stocked up on the most heavily sold-down metals.

Metals were underpinned by hopes for more stimulus after China’s January trade performance was worse than expected.

Exports declined even though China has allowed the yuan to weaken nearly 6 percent against the U.S. dollar since last August, underlining the extent to which global demand has weakened. China stocks ended lower but pared initial losses.

Given that metals are already at or below the cost of production and factories have low inventories as the seasonally strongest quarter for manufacturing gets ready to grind into gear, traders are betting prices can’t go much lower.

“Somehow one can get the feeling that metals are more resilient as they have already experienced what the stock markets are going through now,” Ed Meir of INTL FC Stone stated in a report.

Investors were also turning less bearish towards copper. Hedge funds and money managers cut bearish bets in COMEX copper futures and options by around half in the week to Feb. 9, U.S. Commodity Futures Trading Commission data showed on Friday.

Three-month copper on the London Metal Exchange had climbed 2.1 percent to $4,596.50 a tonne by 0730 GMT, extending a 1.2 percent gain from the previous session, which saw prices end in the week down by more than 2 percent.

China’s copper imports rose 5.3 percent compared with last January, to reach 437,000 tonnes, helped by global prices that made it more economic to import - a scenario that should support imports out til March, Citi said in a note.

Aluminium semis exports fell in January after strong November and December levels, due in part to large smelter curtailments in late 2015, Citi said.

“Exports are likely to fall in February, but may bounce back in March as the export arb has improved, as have producer margins thanks both to a rebound in aluminium prices and power tariff cut.”

In other metals, LME nickel rallied 4.5 percent, reversing a more than 4 tumble percent last week.

As Shanghai Futures Exchange markets reopened, copper caught up with London’s losses, sliding as much as 2 percent, while ShFE nickel slumped almost 7 percent, before both metals cut losses.

JP Morgan chose to shut its short Dec 2016 LME nickel trade on Friday after prices slumped to the lowest in 13 years at $7,550 a tonne last week. It sees cash nickel trading at $8,000/t in the first quarter.

“While we still think nickel prices could stay at or even below these current low levels for rest of the Q1 after the rather steep sell-off over the last week, we have chosen to take profit on the trade so as to prudently manage our risk,” it said.


Three month LME copper

Most active ShFE copper

Three month LME aluminium

Most active ShFE aluminium

Three month LME zinc

Most active ShFE zinc

Three month LME lead

Most active ShFE lead

Three month LME nickel

Most active ShFE nickel

Three month LME tin

Most active ShFE tin

Reporting by Melanie Burton; Editing by Joseph Radford and Sherry Jacob-Phillips

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