Copper extends losses, investors hope for stimulus

NEW YORK/LONDON Mon Aug 13, 2012 2:07pm EDT

A shipment of copper is seen in the port of Valparaiso city, about 121 km (75 miles) northwest of Santiago, June 29, 2009. REUTERS/Eliseo Fernandez

A shipment of copper is seen in the port of Valparaiso city, about 121 km (75 miles) northwest of Santiago, June 29, 2009.

Credit: Reuters/Eliseo Fernandez

NEW YORK/LONDON (Reuters) - Copper fell for a fourth straight session on Monday as persistent concerns about the faltering health of the global economy and its impact on near-term demand prospects drove losses across the broader industrial metals' complex.

Copper led the broad-based decline with a more than 1 percent fall after data showed Japan's economic expansion slowed more than expected in the second quarter.

Copper prices have shed 12 percent since the beginning of May, hit by mounting fears of deteriorating economic outlooks in top metals consumer China, the euro zone and the United States.

But expectations for central bank stimulus measures amid signs of global economic weakness have helped to limit copper's downside, keeping prices locked in a well-worn trading range between $7,200 a tonne ($3.25 per lb) and $7,800 a tonne ($3.55 per lb) since mid-May.

"The world seems overtly pessimistic about economic activity, and I think that's probably wrong," said Dennis Gartman, a commodities trader and editor/publisher of The Gartman Letter.

"The Chinese will soon be cutting both their reserve requirements and interest rates, and I think it's only a matter of time, maybe a week or two, before the ECB is asked by the Spanish to support the Spanish bond market."

COMEX copper for September delivery fell 3.90 cents to settle at $3.3535 per lb, after dealing between $3.3420 and $3.4020.

COMEX volume stood near 55,000 lots in late New York trade, more than 20 percent above the 30-day norm, according to preliminary Thomson Reuters data.

Benchmark copper on the London Metal Exchange closed down $95 at $7,395 per tonne.

"There seems to be a general tone of weakness across a number of markets due to some weaker economic data, in particular the disappointing Chinese data," said Gayle Berry, an analyst at Barclays Capital.

Last week, data showed China's annual consumer inflation hit a 30-month low in July and industrial output grew at it slowest pace in three years - figures poor enough to trigger more policy moves by Beijing, analysts said.

"There is an underlying expectation that we will see some sort of policy response. Until the market sees this is going to happen or until we get something better on the news front, this kind of weaker tone looks like it's going to stay with the metals in the short term," Berry said.

Further price pressure Monday stemmed from a weak Chinese physical copper market, with a 6.8 percent fall in output in July from a month earlier to 483,000 tonnes, official data showed, as large stockpiles and weak demand prompted smelters to reduce production.

"Given that industrial production in China was down in July, it makes sense that metals production also fell last month," Commerzbank said in a note.

"Due to the summer slump and low copper prices, and the recent sharper increase again in stocks on the SHFE, Chinese copper producers have carried out more maintenance work and thus cut their capacity utilization. Together with the lower import figures ... this is evidence at the same time of the currently somewhat muted demand in China."

UPSIDE FOR TIN?

Standard Bank analyst Leon Westgate said tin prices have upside potential after announcements earlier this month of cutbacks in Indonesia, LME stocks that are lower than usual at this time of year and apparent warehouse bottlenecks.

"Demand obviously needs to be in place too, but assuming it is, the ingredients may be coming together for a decent rally in prices, and premia, as we head into Q4," he said in a monthly research report.

A further 415 tonnes of cancellations in LME tin stocks on Monday brought total cancelled stock to 5,155 tonnes, 44 percent of total inventories. Cash to three months moved into backwardation last week and was at a $5 backwardation on Monday compared with a $16 contango on August 6.

Three month tin finished down 1 percent at $17,700 a tonne.

In other metals, LME aluminum ended down $14 at $1,867 a tonne, while nickel eased $25 to $15,375 a tonne, after touching a fresh three-year low of $15,247. Zinc shed $16 to $1,819 and lead fell $25 to finish at $1,867 a tonne.

(Additional reporting by Eric Onstad in London and Carrie Ho in Shanghai; editing by Jim Marshall)

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