METALS-Copper falls to week-low on strong dollar, demand uncertainty

Mon Oct 8, 2012 12:18pm EDT

* End to QE3 feared as U.S. jobs data improves
    * World Bank cuts economic forecast for Asia-Pacific
    * China copper demand remains weak, spot prices low

    By Maytaal Angel and Harpreet Bhal
    LONDON, Oct 8 (Reuters) - Copper prices slipped to their
lowest level in more than a week on Monday, pressured by a firm
dollar and persistent concerns about the outlook for demand from
top consumer China.
    Benchmark three-month copper on the London Metal Exchange
 was untraded at the close, but bid at $8,180, down from
Friday's close of $8,295. Earlier, the metal used in power and
construction touched its lowest since late September at $8,128.
    "Over the last few weeks copper prices increased due to
financial support from QE3 and not from fundamentals. A
correction was overdue and we think there is scope for copper to
move down to around $7,800 - its 200 day moving average," said
Gianclaudio Torlizzi, partner at T-Commodity. 
    "We need to have a clearer picture on the manufacturing
sector (in China) and that will be crucial in order to provide
direction for copper." 
    Copper has risen around 8 percent since the start of
September and touched a 4-1/2 month peak of $8,422, fuelled by a
 third round of quantitative easing (QE3) by the U.S. Federal
Reserve, the promise of bond buying by the European Central Bank
(ECB) and stimulus measures in Japan and China. 
    The World Bank earlier cut its economic forecasts for the
East Asia and Pacific region, saying the slowdown in China could
get worse and last longer than expected, sparking renewed debate
over a sharp decline in growth in the world's second largest
economy. 
    China is the world's top consumer of copper, with demand
from the country representing around 40 percent of global
refined copper consumption. 
    Investors will eye China's third quarter growth data at the
end of next week, which analysts expect to show the weakest
three months of the year. China is also expected to announce
export-import data for September on Saturday. 
    Adding pressure to metals prices was a fall in the euro
against the dollar, as investors grew cautious ahead of the
third-quarter earnings season. 
    Also weighing was uncertainty over the timing of a Spanish
bailout request, with little progress expected from a meeting of
euro zone finance ministers later on. 
    A weak euro makes dollar-priced metal more costly for
European and other non-U.S. investors.
    The dollar rallied on Friday after data showed the U.S.
unemployment rate fell to a near four-year low in September,
though the numbers also sparked worries that the Federal
Reserve's quantitative easing programme might end prematurely.
    BNP Paribas analyst Stephen Briggs said other payrolls
concerns might also be dogging metals. "Realistically there's a
lot of question marks around that drop in the unemployment rate,
it may indicate some statistical anomalies," he said.  
    "We're in a risk off day, it's not anything very specific to
base metals, we've had a pretty good run since early August so
it was always likely we were going to get a correction."
    National holidays in Japan and the United States on Monday
were expected to limit trading activity.
            
    SLUGGISH DEMAND 
    In China, traders returned to the market from a week-long
national holiday to find few signs of demand improving.
    "Investors are dismayed by sluggish downstream demand in
China. In copper, spot prices are still trading at a large
discount to prompt-month futures. If this continues, there may
be more downside room to copper futures," said Orient Futures
Derivatives Director Andy Du.
    Chinese prices of spot copper were trading at a discount of
150 yuan per tonne to the ShFE front-month October contract
<SCFc1 SHMETC> by the session close, pointing to still weak
consumer demand. Spot aluminium, zinc and lead were also trading
lower than their Shanghai front-month futures. 
    Soldering material tin ended at $22,100, down from
Friday's close of $22,400, with the premium for cash tin 
easing versus the benchmark price, indicating nearby supplies
are improving.
    Zinc - used in galvanizing - ended at $2,035, from
$2,075, having earlier touched its lowest since mid-September at
$2,034.
    Battery material lead ended at $2,260 a tonne, from
$2,288 a tonne on Friday, despite a large drop in LME lead
stocks of 3,225 tonnes, bringing closing stocks to a paltry
251,350 tonnes. 
    Aluminium slipped to $2,081.75 from $2,100, earlier
touching its lowest in more than a week at $2,071.
    Stainless-steel ingredient nickel was untraded in
rings, but bid at $18,070 from Friday's close of $18,300. It
earlier hit its lowest level in more than a week at $17,950. 
    
 Metal Prices at 1605 GMT
 Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T
  Metal            Last      Change  Pct Move   End 2011   Ytd Pct
                                                              move
  COMEX Cu       377.00       -0.95     -0.25     344.75      9.35
  LME Alum      2082.00      -28.00     -1.33    2020.00      3.07
  LME Cu        8175.25     -119.75     -1.44    7600.00      7.57
  LME Lead      2256.00      -32.00     -1.40    2034.00     10.91
  LME Nickel   18041.00     -259.00     -1.42   18650.00     -3.27
  LME Tin      22030.00     -370.00     -1.65   19200.00     14.74
  LME Zinc      2034.25      -40.75     -1.96    1845.00     10.26
  SHFE Alu     15650.00     -110.00     -0.70   15845.00     -1.23
  SHFE Cu*     58990.00     -780.00     -1.31   55360.00      6.56
  SHFE Zin     15460.00     -220.00     -1.40   14795.00      4.49
 ** Benchmark month for COMEX copper
 * 3rd contract month for SHFE AL, CU and ZN
 SHFE ZN began trading on 26/3/07
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