METALS-Copper slides after weak U.S. jobs report

Fri Apr 5, 2013 12:58pm EDT

* Copper near 8-month lows, more losses expected
    * Chinese markets shut for a 2nd day of holidays
    * Weak job gains cast shadow on U.S. economic outlook


    By Susan Thomas and Eric Onstad
    LONDON, April 5 (Reuters) - Copper fell on Friday to within sight of the
eight-month lows it hit on Thursday, after far weaker than expected U.S. jobs
data spooked investors about the state of the world's largest economy.
    A two-day holiday in top copper consumer China has also dampened demand for
the metal.
    Three-month copper on the London Metal Exchange slid to a session
low of $7,384 a tonne following the U.S. data before paring losses to close at
$7,406, a decline of 0.5 percent. 
    "Certainly, the number was not very good, as it extends a string of rather
poor releases we have been getting out of the States this week," said analyst
Edward Meir at INTL FCStone in New York.
    Friday's data showed American employers hired at the slowest pace in nine
months in March, a sign that Washington's austerity drive could be stealing
momentum from the economy.   
    Concerns had already been growing about the outlook for the U.S. economic
recovery after weaker-than-expected data earlier this week on manufacturing
activity and private sector hiring.
    "On balance, I think the down move we are seeing in commodities will
continue into next week," Meir added.    
    On Thursday, copper slumped to a low of $7,331.25, the weakest since August,
but bounced to close the day slightly higher.
    Prices are down around 6 percent so far this year as inventories have
steadily climbed while demand in China has been disappointing.
    A sell-off that began in mid-February has continued into early April, with
the majority of the complex now trading at multi-month lows, Barclays Capital
said in a research note.
    "Neither macro nor fundamental trends have offered any persuasive reasons to
counteract this price trend during this time period," it said.
    Some analysts expect copper prices to start picking up in the current
quarter, which is seasonally the strongest.
    "As the second quarter gets under way, we should see prices start rallying.
I think we will get back on track again, and we're staying faithful to the
expectation that we will get a seasonal uptick," Societe Generale analyst Robin
Bhar said.
    Chinese demand has been recovering, but traders are reluctant to take
positions, at least until Monday when Chinese markets reopen.
    
    WAREHOUSE BACKLOGS
    Aluminium touched a low of $1,868 following the U.S. data and after
LME stocks rose further. It failed to trade in closing open-outcry activity, but
was bid at $1,886.50 a tonne, up $1.50 from Thursday's close. 
    Data showed aluminium inventories rose by 6,000 tonnes to
5.21 million tonnes, which is climbing back towards a record of 5.24 million
tonnes hit in December.
    One warehouse location, the Dutch port of Vlissingen, reported 67,375 tonnes
of fresh cancellations, which are usually a sign of demand when owners wish to
pull metal from depots, but one analyst was wary.
    "A large jump in cancelled warrants in Vlissingen... looks more to do with
queue maintenance, with a 15,000-tonne inflow of metal at the same location
helping top-up on-warrant inventory there too," Leon Westgate of Standard Bank
said in a note.
    Commodity trade house Glencore dominates metals warehouses in
Vlissingen with its Pacorini subsidiary.
    LME rules allow long backlogs to build up at certain warehouses, which is
lucrative for the owners who earn rent from the metal waiting for months to be
delivered.
    Among other metals, LME zinc also failed to trade at the close, but
was bid at $1,883 a tonne, down 0.3 percent, and lead closed down 1.4
percent at $2,045 a tonne. 
    Tin bucked the softer trend to finish the day 0.6 percent higher at
$22,895 a tonne and nickel lost 0.9 percent to $15,950.
    
    
 Metal Prices at 1410 GMT
 Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T
  Metal            Last      Change  Pct Move   End 2012   Ytd Pct
                                                              move
  COMEX Cu       334.50       -0.65     -0.19     365.25     -8.42
  LME Alum      1879.25       -5.75     -0.31    2073.00     -9.35
  LME Cu        7419.00      -21.00     -0.28    7931.00     -6.46
  LME Lead      2061.75      -13.25     -0.64    2330.00    -11.51
  LME Nickel   16030.00      -70.00     -0.43   17060.00     -6.04
  LME Tin      22614.00      -86.00     -0.38   23400.00     -3.36
  LME Zinc      1884.25       27.25     +1.47    2080.00     -9.41
  SHFE Alu     14565.00       -5.00     -0.03   15435.00     -5.64
  SHFE Cu*     54070.00     -270.00     -0.50   57690.00     -6.27
  SHFE Zin     14520.00     -145.00     -0.99   15625.00     -7.07
 ** Benchmark month for COMEX copper
 * 3rd contract month for SHFE AL, CU and ZN
 SHFE ZN began trading on 26/3/07