METALS-Copper falls to 20-month low on Fed, weak China data

Thu Jun 20, 2013 12:20pm EDT

* U.S. Fed signals end to stimulus measures by year-end

* Chinese factory data points to slowdown

* Nickel drops to 4-year low, aluminium at 3-1/2 year low

By Harpreet Bhal

LONDON, June 20 (Reuters) - Copper fell to its lowest level in 20 months, hit by further evidence that the economy of top metals consumer China is slowing down and the U.S. Federal Reserve's stated intention to begin scaling back stimulus measures later this year.

Aluminium fell to its lowest level in more than 3-1/2 years, while nickel dropped to its lowest level in four years. Tin fell to its lowest in 9-1/2 months.

Financial markets tumbled after Fed chairman Ben Bernanke confirmed that U.S. economic growth was strong enough to begin tapering its $85 billion in monthly asset purchases later this year.

Data showing China's factories showed activity slumped to a nine-month low in June, heightening the risk of a sharper second-quarter slowdown, powered metals' momentum lower.

Benchmark three-month copper on the London Metal Exchange fell more than 2 percent to $6,750 a tonne, its lowest level since October 2011. It closed at $6,770, down from a last bid of $6,960 on Wednesday.

"At this point, it is difficult to get too excited about any of the metals, as most seem to be clearly influenced by the slowing growth trends in China, perhaps more so than anything the Fed could throw at them," INTL FCStone analyst Ed Meir said.

China is the world's top consumer of copper, accounting for around 40 percent of global refined demand.

"There is panic selling all over the commodities sector after the Fed's comments and the data from China," said Daniel Briesemann, analyst at Commerzbank.

"We are surprised to see such a strong reaction as the Fed is only adhering to its long-known plan. We think the falls (in markets) are overdone and I would expect to see a counter move in the next few days."

Gold tumbled to its lowest level in more than 2-1/2 years, while oil fell more than $2 a barrel.

The Fed's bond buying has largely supported commodity prices by lowering the value of the U.S. dollar and making assets priced in the greenback cheaper for holders of other currencies.

But following the latest Fed comments, the dollar has firmed, putting pressure on metals prices.

Copper prices were also weighed down by the expectation of further supply entering the market this year, particularly with Rio Tinto's plans to start exporting copper from the Oyu Tolgoi mine in Mongolia on Friday.

Inventories of copper in warehouses monitored by the LME have been climbing in recent weeks to touch a 10-year high, contributing to the metal's 14 percent fall this year.

LME aluminium closed at $1,797 a tonne, from $1,830 on Wednesday, having earlier fallen to its lowest since early October 2009 at $1,789.50.

Nickel closed at $13,700 from $14,200, tin at $19,500 a tonne from a close of $20,100, zinc at $1,829.50 from $1,861, and lead at $2,018 from $2,066.

"Price levels are now certainly low enough to prompt more cutbacks on the supply side of the equation, particularly in aluminium, nickel and zinc, the three metals we think are saddled with the most excess," INTL FCStone's Meir said in a research note.

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