METALS-Copper falls on uncertain demand outlook for China

Mon Nov 4, 2013 12:23pm EST

* Euro falls vs dollar on expectations ECB may loosen policy

* Cash tin prices at $9.60 premium against 3-mth prices

By Harpreet Bhal

LONDON, Nov 4 (Reuters) - Copper fell for a third consecutive session on Monday due to a drop in the euro, but remained firmly within a range that has persisted for months on uncertainty about the outlook for demand from top consumer China.

Benchmark copper on the London Metal Exchange closed at $7,149 a tonne, down from a last bid of $7,240 on Friday.

A drop in the euro against the dollar put pressure on metals prices as investors and speculators sold the single currency on mounting expectations that the European Central Bank (ECB) may loosen policy in the near term.

A weaker euro versus the dollar makes it more expensive for investors holding euros to buy dollar-priced commodities, thus typically pushing prices lower.

Copper has traded in a $7,000-$7,420 range since early August partly due to uncertainty about real demand growth from China.

"The increase in apparent demand in China in the last couple of months is partly restocking after the falls in prices during the summer months," said Nic Brown, head of commodities research at Natixis.

"The fact that the market knows that there has been restocking is why prices are weak now. If it wasn't for the increase in Chinese stockpiles, copper prices would be a lot higher."

Bonded stocks in China are climbing, while premiums have begun to soften. Citi has estimated that bonded copper stocks have increased to around 450,000 tonnes from lows of 300,000 tonnes a month or two ago, while stocks have also built up in domestic non-exchange warehouses.

Reflecting softer demand, premiums for Shanghai bonded copper stocks have slipped by $2.50 to $180-$205, according to China price provider Shmet. ()

Copper posted a fall of close to 1 percent in the month of October, its first monthly fall since June.

Expectations for rising supply have also been hurting the outlook for copper prices.

Analysts polled by Reuters this month expected the copper market to record a surplus of 182,000 tonnes this year, up from a previous forecast of 153,000 tonnes, and then balloon to a surplus of 328,000 tonnes in 2014.

"There's a lot of forces at play pushing down on copper prices, such as prospects for rising supply," said analyst Tim Radford at Sydney-based advisory Rivkin.

Traders also were watching for signals on when the U.S. Federal Reserve may start to rein in its bond purchases, which have buoyed commodities over the past few years by driving liquidity towards the asset group.

"The third-quarter U.S. GDP figures and the labour market report should give us further indications of the state of the U.S. economy and the next steps to be taken by the Fed when they are published on Thursday and Friday, respectively," Commerzbank analysts said in a note.

Sentiment was also hit by worries about a crackdown on China's property market after the southern city of Shenzhen was reported to be raising minimum down payments on second home purchases in an attempt to stem rising prices.

China's soaring property sector has been a major driver of copper imports.

In other metals, tin traded on Indonesia's only approved exchange rose to around 3,000 tonnes last month from 795 tonnes in September, in what signals a partial recovery in shipments by the world's top exporter of the metal.

Three-month tin closed at $22,710 a tonne down from Friday's close of $22,775.

Benchmark aluminium closed at $1,822 from $1,843 and zinc at $1,924 from $1,940. Nickel closed at $14,370 from $14,570 and lead at $2,159 from $2,187.

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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