METALS-Copper eases from seven-month high as supply surplus looms

Fri Jan 3, 2014 12:23pm EST

Related Topics

* Copper supply expected to move from deficit to surplus

* Chinese growth worry weighs on base metal prices

By Susan Thomas and Harpreet Bhal

LONDON, Jan 3 (Reuters) - Copper dipped on Friday, easing from a seven-month high as expectations of higher supplies and concerns over Chinese growth weighed on the market.

Three-month copper on the London Metal Exchange closed at $7,315 a tonne from $7,393. It hit an intra-day high of $7,460 on Thursday, its highest level since June 5.

Copper has gained support from a lack of readily available refined metal because of falling exchange stocks. But ample copper concentrate seen flowing into the market this year will result in swelling supplies.

"We've been saying for a long time that the copper market is still in deficit. The fall in stockpiles that has taken place since June is very substantial ... so it's not unreasonable for the market to be pricing some sort of short-term physical scarcity," Natixis analyst Nic Brown said.

"It's a different question as we go into 2014. Our view is that, yes, we will move from deficit to surplus this year. We think there is a decent amount of new supply coming on stream."

Analysts polled by Reuters in October expected the copper market to show a surplus of 182,000 tonnes in 2013, before ballooning to 328,000 tonnes in 2014.

Copper fell 7.2 percent in 2013, though it gained more than 4 percent in December, posting its biggest monthly rise since September 2012.

Copper stocks in LME-monitored warehouses are at the lowest level since January 2013.

"Cancelled warrants on the LME now account for about 65 percent of total stocks, so inventories on hand are actually less than the headline figure implies," said Edward Meir, analyst at INTL FCStone, referring to stocks earmarked for delivery.

However, a survey showing that Chinese factory activity expanded at the slowest pace in three months in December served to restrain copper on Friday.

Signs of an improving global economy have underpinned copper but China's growth is key for the market. China is the world's largest consumer of the metal, accounting for as much as 40 percent of global demand for refined copper.

Investors in the industrial metals market will be watching a spate of speeches from top U.S. Federal Reserve policymakers, including outgoing Chairman Ben Bernanke, later on Friday. Any comments on the outlook for tapering monetary stimulus could affect market sentiment.

LME tin ended at $21,500 from Thursday's close of $22,075, and lead ended at $2,176 from $2,221. Zinc closed at $2,026 from $2,075.

Aluminium, untraded at the close, was bid at $1,772 per tonne from $1,803. Nickel, also untraded, was bid at $13,845 per tonne from $14,030.

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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