METALS-Copper falls on firm dollar, weak demand prospects

Thu May 16, 2013 6:24am EDT

* Euro zone imports fall 10 pct in March
    * Dollar at six-week high vs euro, 4-1/2 year peak vs yen
    * Coming up: U.S. building permits, housing starts 1230 GMT

    By Susan Thomas
    LONDON, May 16 (Reuters) - Copper fell on Thursday as the dollar
strengthened and on concern about lacklustre demand for the metal in top
consumer China that was compounded by evidence the European and United States
economies are still struggling.
    Copper is seen as an economic bellwether because it is used extensively in
construction and power cables.
    Three-month copper on the London Metal Exchange was down 0.6 percent
at $7,151 a tonne by 1006 GMT, from a close of $7,198 on Wednesday.
    "The U.S. dollar is getting substantially stronger and the movement in
copper seems to be tracking that quite highly. And we still see quite limited
activity from China," analyst George Adcock at broker Marex Spectron said.
    "CTA short covering has dissipated and that was basically giving bid support
in the market and the CTAs are now net sellers," he added, referring to
commodity trading advisors.
    The dollar was near a six-week high against the euro and a 4-1/2 year peak
against the yen on Thursday on prospects for more monetary easing in the euro
zone and scaled back asset buying in the United States. 
    The depth of the euro zone's downturn was shown in data on Thursday. Falling
prices in Germany and France pulled consumer inflation to a three-week low in
April, highlighting the risk of deflation, and imports fell 10 percent in March.
 
    In the United States, factory output dropped in April and manufacturing
activity in New York state contracted this month, data showed on Wednesday.
    "The trend has been down for copper. I still feel we've got further downside
to come because of the trend of weak global macro data coming through," said Tim
Radford, global analyst at Sydney-based advisor Rivkin.
     China's demand for commodities has weakened, and the country's vice-premier
Zhang Gaoli said in remarks published late on Wednesday that China must
"strictly prohibit" further expansion of bloated industrial sectors.
 
    Overall, all commodities are under pressure. This was reflected in reports
this week that showed global investment banks suffered another bruising decline
in commodity trading in the first three months of this year.  
    Investors are waiting for U.S. building permits and housing starts reports
later in the session, although for the metals market the impact will be felt
through the effect the data has on the dollar.
    A stronger dollar makes commodities priced in the greenback more expensive
for holders of other currencies.
    
 Metal Prices at 1004 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       324.60       -1.75     -0.54     365.25    -11.13
  LME Alum      1839.25       -0.75     -0.04    2073.00    -11.28
  LME Cu        7146.00      -52.00     -0.72    7931.00     -9.90
  LME Lead      1960.00      -10.00     -0.51    2330.00    -15.88
  LME Nickel   14909.00        4.00     +0.03   17060.00    -12.61
  LME Tin      20620.00     -135.00     -0.65   23400.00    -11.88
  LME Zinc      1820.50       -2.50     -0.14    2080.00    -12.48
  SHFE Alu     14525.00      -45.00     -0.31   15435.00     -5.90
  SHFE Cu*     52270.00     -300.00     -0.57   57690.00     -9.40
  SHFE Zin     14370.00      -75.00     -0.52   15625.00     -8.03
 ** 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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