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Copper drifts lower as China kicks off Lunar New Year holiday

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LONDON — Copper prices edged lower on Friday as investors sought to balance a potential boost to metals demand from the reopening of China against weak short-term signals of consumption as the country celebrates the Lunar New Year.

Three-month copper on the London Metal Exchange slipped 0.1% to $9,299 a tonne by 1115 GMT, taking its gains to 1% for this week and 11% for the month so far.

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“We think the recent increase in base metals will hold, more or less, but this quarter will be challenging,” said Edward Gardner, commodities economist at Capital Economics in London.

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“It’s not until March that we get the new budget for China, where they expect to see some new stimulus measures.”

Capital Economics expects the LME copper price to weaken this quarter, ending March at $8,500 a tonne, before rebounding to end the year close to the current level, he added.

People across China crowded into trains and buses for one of its busiest days of travel in years on Friday, feeding fears of new surges in a raging COVID-19 outbreak that officials say has hit its peak.

Shanghai Futures Exchange copper closed up 0.1% at 70,420 yuan ($10,399.47) a tonne, with a weekly gain of 2.3%.

The exchange will remain closed for trading on Friday evening and next week because of the Lunar New Year holidays.

“For now, onshore physicals are soft, copper demand is still 10% lower year on year and import arbitrage is negative,” said Zerlina Zeng, a senior research analyst at Fitch Solutions.

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“But onshore traders are turning more positive on China’s macro outlook.”

SHFE copper inventories jumped 36.6% to 139,967 tonnes on Friday.

CITIC Futures noted the strong production among smelters this month and the still weak consumption could result a higher-than-normal inventories build-up during the holiday, reaching as high as 300,000 tonnes.

Among other metals, LME aluminum rose 0.4% to $2,599 a tonne and tin advanced 1.2% to $29,150, while zinc eased 0.7% to $3,433.50, lead dipped 0.4% to $2,133.50 and nickel dropped 1.2% to $29,000.

For the top stories in metals and other news, click ($1 = 6.7715 Chinese yuan renminbi) (Reporting by Eric Onstad Additional reporting by Siyi Liu and Dominique Patton in Beijing. Editing by Jane Merriman)

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