Copper at week-low on China risks
Copper at week-low on China risks
July 30, 2009
Article from: Reuters
COPPER prices fell to their lowest level in a week as the US dollar firmed on risk aversion and investors fretted that China might reduce imports of the metal.
Weak equities markets, a heavy build in US oil inventories and a drop in orders for durable US-made goods also weighed on commodities in general.
Benchmark copper on the London Metal Exchange closed down $US115 at $US5415 a tonne. The metal, used in power and construction, hit a session low of $US5385 a tonne, down sharply from Monday's 10-month highs of $US5646.
In US trade, copper for September delivery ended down US4.30 cents, or 1.7 per cent, at $US2.4775 a pound on the New York Mercantile Exchange's COMEX division.
The sessions low was $US2.4500 -- which was a bottom since July 22.
There's concern that the market's got ahead of fundamentals for the time being, said Matthew Zeman, head of trading at LaSalle Futures Group in Chicago.
KEY COMMODITY PRICES: oil, gold, base metals, livestock and wheat
He said on-off sentiments about the global economy were off again on fears China may restrict lending in the second half, leading to a possible liquidity squeeze.
I wouldn't be surprised to see the September (COMEX) contract fall back to around $US2.25 to where we are right now, Mr Zemand said.
It looks toppy. I think the path of least resistance is on the downside right now.
Record Chinese imports had propelled copper prices up around 80 per cent this year, but analysts expect imports will slow as China is now fully stocked with metal.
The market has been growing more worried about an oversupply of base metals in China and prospects of rising stockpiles, said Daniel Major, an industry analyst at RBS Global Banking and Markets in London.
I think the market is just feeling a bit cautious on some of this material that's moved into China, Major said.
The US dollar climbed to a two-week high against the euro as investors sought a safe haven.
US stocks fell amid worries that China's banks might be poised to hit the brakes on lending to stem market excesses, a move that could curb the global economic recovery.
A larger-than-expected drop of 2.5 per cent in June for orders of US durable goods weighed further on the market.
The latest data showed stocks of copper in LME warehouses fell 575 tonnes to total 278,350 tonnes. However, cancelled warrants -- material tagged for delivery out of warehouses -- fell by 1825 tonnes, meaning more material is available.
LME stocks have been rising since mid-July, although they remain well short of February levels of around 500,000 tonnes.
LME aluminium closed at $US1803 from $US1824 yesterday. Stocks of the metal used in transport and packaging fell 3,225 tonnes but remained at record levels near 4.6 million tonnes.
High aluminium stocks are not weighing heavily on aluminium as a lot of material is tied up in financing deals with banks.
LME tin was untraded at the close but was last bid at $US14,200 from $US14,100 a tonne. The metal traded at a premium of $US280-$US300 for cash material over the benchmark 3 month price.
This compares with a discount of $US40 for cash tin in mid-June.
Traders remain concerned about the amount of long positions to buy tin compared with available metal in LME warehouses.
Galvanising metal zinc closed at $US1643 from $US1690 on the LME, battery material lead closed at $US1760 from $US1767 while steel-making ingredient nickel closed at $US16,250 from $US16,630.