SHANGHAI copper rallied to its highest in four months yesterday, buttressed by tight supply and solid improvement in China’s private sector.

    Activity in China’s factory sector expanded in June for the first time in six months as new orders surged, a HSBC survey showed yesterday.

    “The stimulus measures of the past three months are really working and having a positive impact on the overall economy,” said Helen Lau, senior mining analyst at UOB-Kay Hian Securities in Hong Kong.

    Inflation concerns, driven by higher oil prices, were also supporting prices, Lau said. But further gains faced headwinds, given seasonally slower demand from copper cable and rod manufacturers in the next few months, she added.

    The most-traded August copper contract on the Shanghai Futures Exchange rallied 2.3 percent to 49,550 yuan (US$8,000) a ton. It had earlier climbed to 49,610 yuan a ton, the strongest since Feb. 25.

    The HSBC/Markit flash China manufacturing purchasing managers’ index rose to 50.8 in June from May’s final reading of 49.4, beating a poll forecast of 49.7 and creeping above the 50-point level that separates growth in activity from contraction.

    Meanwhile, UOB-Kay Hian’s Lau said an investigation into suspected fraud at a Chinese port has caused banks to take longer to approve loans for copper imports.

    “Certainly China will reduce imports because of this financing issue and it will also take a longer time to get cleared, so this will create some short-term shortage in the spot market,” she said.

    Shaken by a fraud investigation into metal financing in the Qingdao port, the world’s seventh-busiest, banks and trading houses have been made painfully aware of the risks they face storing commodities in China’s sprawling warehouse sector. (SD-Agencies)