METALS-Copper hits 2-week low on outlook for demand, surplus

Fri Oct 25, 2013 12:24pm EDT

Related Topics

* China regulators signal credit tightening

* Analysts flag increasing surplus of copper

* Prices on track to fall 1.6 pct for the week

By Susan Thomas and Harpreet Bhal

LONDON, Oct 25 (Reuters) - Copper fell on Friday to its lowest in two weeks on expectations for a growing surplus, patchy data on global factory growth and fears top consumer China would clamp down on credit.

Copper has traded in a $7,000-$7,420 range since early August due to swelling supply and slower demand growth in China.

Further hurting risk appetite in the short term, China's money rates shot up this week to their highest levels since a dramatic cash crunch in June as regulators signalled they were considering mild tightening to get rising property prices and inflation under control.

Three-month copper on the London Metal Exchange fell to $7,113, its lowest since Oct. 11. It was untraded at the close, and was bid at $7,185 a tonne, from $7,175 at the close on Thursday.

Prices were on track to close the week down by around 1.6 percent, or a fall of around 10 percent for this year.

"It's partly a concern about Chinese credit tightening, which is weighing on sentiments," Citi analyst David Wilson said. "We also had Chinese production data, which for some metals was really quite phenomenally strong."

China is the world's largest consumer of the metal used in power and construction.

"Chinese money rates remain high and show no sign of receding," said Edward Meir, analyst at INTL FCStone.

"The People's Bank of China again seems to be holding back liquidity for month-end needs and although this could be a policy signal to make money more expensive, it is too early to know for sure, as we are only a few days into it."

China's refined copper production rose 10.6 percent to a record in September from the previous month due to higher output from new smelting capacity and as increased supply of raw materials boosted operations at existing plants.

Analysts expect the global copper market to post a surplus of 182,000 tonnes this year, up from a previous forecast of 153,000 tonnes, and then balloon to 328,000 tonnes in 2014, according to a Reuters poll this month.

A mixed picture for factory growth also weighed on copper. Factories in China boosted production this month, but U.S. manufacturing output fell for the first time in four years, and the euro zone economy lost momentum, surveys showed this week.

The U.S. Commodity Futures Trading Commission will release its weekly commitments of traders reports over the next two weeks - starting with the report for Oct. 4 later on Friday - as it resumes its functions following the partial U.S. government shutdown.

Lead ended at $2,205 from a close of $2,173.50 on Thursday, zinc at $1,955 from $1,936, tin closed at $23,200 from $22,875 and nickel at $14,580 from $14,650. Aluminium ended at $1,880 from $1,861.

PRICES

Three month LME copper

Most active ShFE copper

Three month LME aluminium

Most active ShFE aluminium

Three month LME zinc

Most active ShFE zinc

Three month LME lead

Most active ShFE lead

Three month LME nickel

Three month LME tin

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