(Corrects direction of canceled warrant change in paragraph 8,
fixes link to LME stocks quote page)
* Weak U.S. data feeds technical correction in copper
* Economic woes dampen demand outlook
* Aluminum inventories punch through new record
(Recasts, updates with New York closing copper prices, adds
NEW YORK to dateline and analyst comments)
By Chris Kelly and Michael Taylor
NEW YORK/LONDON, April 23 (Reuters) - Copper spiraled down
to a two-week low on Thursday, after disappointing economic
data in the United States fed a technical correction in the
metal from a recent rally that drove prices to their loftiest
levels since middle October.
"The fact is that the market had gotten ahead of itself in
terms of the shape of the curve," said John Gross, publisher of
the Copper Journal. "The market has gone nearly vertical in the
last several weeks, which by itself is a sign that it has
become perhaps a bit too overheated."
Copper for July delivery HGN9 on the New York Mercantile
Exchange's COMEX division slipped 6.95 cents, or 3.4 percent,
to settle at $1.9910 a lb, its lowest level on a closing basis
since April 6.
Since the start of the year, the benchmark July contract
has rallied nearly 60 percent to a peak last week at $2.2415,
its highest level since Oct. 15.
On the London Metal Exchange (LME), copper for three-month
delivery MCU3 hit a session trough at $4,290 a tonne, its
lowest since April 8, before closing down $198 at $4,342.
The downside price pressure in the metal used in power and
construction gathered pace after data showed the number of
newly laid off U.S. workers filing claims for unemployment aid
rose last week and sales of previously owned U.S. homes fell in
March. [ID:nN23390443]
Still, copper has been well-supported this year amid
falling inventory levels and rising canceled warrants at LME
warehouses.
The material earmarked for delivery fell to 69,175 tonnes
on Wednesday -- about 16 percent of total stocks -- from 70,975
the previous day while total stocks fell 9,625 tonnes to
440,475 tonnes. <LME/STX1>
RALLY TO FADE?
Analysts believe stockpiling by China, the world's largest
consumer, is behind the moves seen in canceled warrants as they
have been largely at Asian warehouses.
"The market has latched onto the recent jump in China's
copper imports as a sign that the worst may be over," Standard
Chartered said in a note. "Copper looks set to push higher in
the short term, mainly for technical reasons."
"However, we expect the rally to fade rapidly as we enter
Q2 ... We do not believe that demand is strong enough yet to
give much support to prices, and the temporary impact of
restocking by China should start to disappear."
Worries about supplies in the near term have pushed the
metal into a $3 a tonne backwardation -- premium for cash
material over the three-month contract MCU0-3 -- compared
with a discount of $40 a tonne at the end of March.
Aluminum MAL3 was $17 softer at $1,448, despite LME
inventories in the metal used in transport and packaging
jumping 17,000 tonnes to a new record of 3.67 million tonnes.
On Wednesday, aluminum canceled warrants rose to 62,250
compared with 10,575 tonnes on Jan. 12.
"One can't be too positive with aluminum as long as
inventories stay at massively high levels," said Marc Elliott,
an analyst at Fairfax. Open interest lots climbed to over
746,262 on Friday from 748,117 the day before. <0#MAL-FUT-OI>
Steel making ingredient nickel MNI3 closed at $11,350
from $11,520 while zinc MZN3 ended at $1,417 a tonne from
$1,460.
Tin MSN3 bucked the trend and rose to $12,500 a tonne
from Wednesday's $12,150 while battery material lead MPB3 was
at $1,460 versus $1,470.
Also at a premium are tin MSN0-3 and lead MPB0-3, at
$300 and $7 respectively, mainly because of dominant positions
holding more than 80 and 90 percent of cash warrants on LME
stocks. <LME/WC> Metal Prices at 1912 GMT Metal
Last Change Pct Move End 2008 Ytd
Pct move
COMEX Cu 199.50 -7.95 -3.83 139.50
43.01
LME Alum 1454.00 -4.00 -0.27 1535.00
-5.28
LME Cu 4310.00 -230.00 -5.07 3060.00
40.85
LME Lead 1425.00 -45.00 -3.06 999.00
42.64
LME Nickel 11125.00 -380.00 -3.30 11700.00
-4.91
LME Tin 12200.00 50.00 +0.41 10700.00
14.02
LME Zinc 1404.00 -56.00 -3.84 1208.00
16.23
SHFE Alu 12890.00 210.00 +1.66 11540.00
11.70
SHFE Cu* 36860.00 460.00 +1.26 23840.00
54.61
SHFE Zin 12465.00 95.00 +0.77 10120.00
23.17
** 1st contract month for COMEX copper * 3rd contract month
for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07
(Additional reporting by Humeyra Pamuk in London; Editing by
Marguerita Choy)
