Copper fell on Tuesday on China demand concern, Greece
Copper fell on Tuesday on concerns over sluggish demand from top consumer China and worries about the euro zone debt crisis, but the metal trimmed its losses after the euro rose as a Greek rescue deal inched closer.
Benchmark copper on the London Metal Exchange (LME) closed at $8,481 a tonne from a close of $8,500 a tonne on Monday.
The metal rose off a session low of $8,354 as the euro rose against the dollar after a Greek official said the government was drafting an agreement on a second bailout. A softer dollar can lift dollar-denominated commodities by making them less expensive for consumers using other currencies.
Greece’s government is preparing the text of an agreement on a 130 billion euro bailout that must be put to political leaders for approval, a Greek government official said, suggesting Athens had largely wrapped up talks with lenders on the rescue.
The metal used in power and construction has risen 10 percent since the beginning of the year, but the run-up is likely to lose steam in the near term as demand from China remains soft, analysts said.
“Lack of evidence of strengthening demand in China is also weighing. There are some signs that China is waiting a bit before buying,” said Stefan Graber, a Credit Suisse analyst.
SIGNS OF WEAKNESS
A drop in inventories of copper in warehouses monitored by the London Metal Exchange to an almost 2-1/2 year low and an increasing number of cancelled warrants, material earmarked for delivery, especially in U.S. locations, pointed to a pick-up in demand from the United States.
Rising copper stocks in sheds monitored by the Shanghai Futures Exchange (SHFE) , however, highlighted that demand was still weak in China, which consumes about 40 percent of the global copper supply.
“The arbitrage ratio between SHFE and London went down further from an almost $100/T discount before the holiday to $400/T-plus at the time of writing this report,” Macquarie analysts said in a research note.
“It indicates lack of buying from Chinese consumers following the quick rally in copper prices as a result of muted demand response post the holiday, growing concern of further copper inventory build in China and the threat from increasing supply of secondary material from the domestic market following higher global copper prices.”
As the spread between copper prices on the Asian Exchange and the London-based exchange has widened and the incentive to import LME metal into Asia has diminished, Chinese trade data later this week is likely to show lower copper imports in January compared with December.
“The market is expecting a lower number, so I don’t think sentiment will deteriorate, but it could cause the metal to retrace some of its earlier gains,” Graber said.
Some copper smelters in China are even considering exporting their refined stocks due to poor domestic demand and higher prices overseas, two traders with direct knowledge of such moves said.
Tin closed at $25,495 a tonne from $24,500, while zinc, used to galvanize steel, closed at $2,120 from $2,131 at Monday’s close.
Battery material lead closed at $2,186 from $2,181 and aluminium closed at $2,255 a tonne from $2,222.
Nickel closed at $21,800 from $21,695.
Metal Prices at 1705 GMT Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T Metal Last Change Pct Move End 2010 Ytd Pct move COMEX Cu 385.80 -0.65 -0.17 444.70 -13.24 LME Alum 2256.00 34.00 +1.53 2470.00 -8.66 LME Cu 8486.00 -14.00 -0.16 9600.00 -11.60 LME Lead 2186.00 5.00 +0.23 2550.00 -14.27 LME Nickel 21710.00 15.00 +0.07 24750.00 -12.28 LME Tin 25201.00 701.00 +2.86 26900.00 -6.32 LME Zinc 2117.50 -13.50 -0.63 2454.00 -13.71 SHFE Alu 16145.00 -70.00 -0.43 16840.00 -4.13 SHFE Cu* 60030.00 -500.00 -0.83 71850.00 -16.45 SHFE Zin 16010.00 -185.00 -1.14 19475.00 -17.79 ** Benchmark month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07 - Reuters
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