Copper slides as China optimism fades

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    Copper prices slipped as optimism faded about stronger demand prospects in top consumer China.

    Benchmark copper on the London Metal Exchange ended down 1.2 per cent at $US5,097 a tonne from an earlier $US5,230, the highest since September 22.

    Traders said copper prices were tracking the fortunes of mining group Glencore, which also started the day on a positive note, but was last down 0.7 per cent.

    Activity at larger, Chinese state factories shrank for a second straight month in September, but the pace of contraction was slower than in August.

    "The data may be suggesting China is about to turn a corner, (and) that at some point we will see more robust demand growth rates," said Bart Melek, head of commodity strategy at TD Securities.

    "At the same time, we're seeing the supply side respond to lower prices. There is a risk the supply/demand balance becomes tighter than the market is expecting."

    Chile's second-biggest copper mine Collahuasi, owned by London-listed Anglo American and Glencore, said this week it planned to cut output by 30,000 tonnes.

    That is not a large amount in a market estimated at around 23 million tonnes this year, but it adds to recent announcements about output cuts and reinforces expectations of miners taking out more capacity.

    "With a deficit next year, we expect to see a turnaround in prices back towards $US6,000 a tonne after the seasonal first quarter surplus period," Macquarie said in a note.

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