METALS-Copper hits month low on signs of slowing China growth

Fri Jan 24, 2014 1:14pm EST

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* Cash copper prices fall against benchmark as buying demand eases

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By Susan Thomas

LONDON Jan 24 (Reuters) - Copper fell to its lowest in a month on Friday and struck its biggest weekly fall since mid-November as slowing growth in China's factories fuelled worries about demand in the world's top metals consumer.

Three-month copper on the London Metal Exchange ended at $7,180 a tonne, its lowest level in a month and down from a close of $7,292 on Thursday. The metal is down 2 percent for the week.

Weaker domestic and overseas demand in January hurt Chinese factory output and drove the Flash Markit/HSBC purchasing managers' index to 49.6 in its first contraction in six months. A reading above 50 indicates growth.

On Friday meanwhile, a global flight from emerging market assets gathered pace as investors worried about the impact of slower growth in China, U.S. monetary policy and political problems in Turkey, Argentina and Ukraine.

"There is nothing positive for copper at the moment," said Naeem Aslam, chief market analyst at Ava Trade in Dublin. "The HSBC Flash manufacturing PMI data rattled many nerves in the market."

He also said there are expectations that the U.S. Federal Reserve will further taper its stimulus package next week, which would put further pressure on copper.

The Fed's bond-buying programme has increased liquidity in markets, which in turn has helped support commodities prices. Fed policymakers will meet next Tuesday and Wednesday.

Limiting losses in copper however, was news that several Chilean ports were on strike, curbing metal, fruit and other shipments from the country that accounts for about a third of the world's copper supply.

Still, nearby tightness in the physical market continues to ease, shown by LME forward spreads, as buying winds down ahead of the Chinese Lunar New Year, which begins next Friday.

LME cash copper traded $24 above the benchmark contract, down from a high of $64.50 on Tuesday.

"Outlook wise, we think that the steady drip-feed of less-than-stellar Chinese macro data will likely keep the pressure on prices for a little while longer, although the selling may abate at about the time that the Chinese New Year holidays commence," said INTL FC Stone in a note.

In other metals traded, LME nickel ended the week down 1.5 percent, closing $14,485 a tonne after having gained more than 6 percent last week before a ban on exports of ore from Indonesia came into force.

The global nickel market surplus more than doubled to 180,000 tonnes in the first 11 months of 2013 compared with the same period a year earlier, a monthly bulletin from the Lisbon-based International Nickel Study Group (INSG) showed.

Lead ended up 0.65 pct to $2,167 a tonne, zinc ended down 1.3 percent at $2,020 a tonne, aluminium closed down just $1 at $1,762 a tonne, while tin was last bid at $22,000 a tonne, unchanged at the close.

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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