* Fed start reining in stimulus later this year if economy
* Copper price touches lowest level since May 3
* Aluminium inventories rise to new record
By Josephine Mason and Susan Thomas
NEW YORK/LONDON, June 19 Copper slid to six week
lows on Wednesday after Federal Reserve chief Ben Bernanke
outlined plans for reining in the U.S. central bank's massive
bond-buying program, comments that boosted the dollar and
knocked assets considered more risky.
Bernanke said the Fed's policy-setting committee will begin
to pull back later this year on its $85 billion in monthly asset
purchases if the economy grows as expected. He said the eventual
goal would be to end the program by the middle of 2014.
The stimulus which has bolstered industrial metal prices in
recent years, so Bernanke's blueprint for ending it surprised
some investors after the Fed's earlier statement was virtually
unchanged from last month.
"He fully articulated the changes of the QE program. For
metals, it's not bullish," Jason Schenker, president of Prestige
Economics Jason Schenker, said.
Investors worry that a pull-back may derail a recovery in
the construction industry, a key to industrial metals demand.
The Fed's stance could also strengthen the dollar, making
commodities priced in the greenback more expensive for holders
of other currencies.
The most-active September contract on COMEX fell back close
to six-week lows after the Fed statement, then settled down 0.5
percent at $3.1515 per lb, its lowest since May 3.
Dropping for a third-straight day, three-month copper on the
London Metal Exchange slid 1.1 percent to a session low
of $6,925 a tonne, its weakest since May 3. It failed to trade
in closing open-outcry activity, but was last bid at $6,960 a
Safe-haven assets including bonds benefited from Bernanke's
comments. Gold fell more than 1 percent.
Copper has dropped 12 percent so far this year and is
heading towards its third straight quarterly decline in the
Market participants will watch for HSBC Flash Chinese
Manufacturing purchasing managers index (PMI) on Thursday for a
further reading on the health of the world's second-largest
economy, which is the biggest enduser of copper.
Since Chinese growth has been weak and sentiment has
deteriorated, even a modestly positive PMI report could push
industrial metals prices higher, Schenker said.
Some fundamental issues were supportive for copper prices.
The world's second-largest copper mine, Freeport McMoRan
Copper and Gold Inc's Grasberg in Indonesia, remains closed five
weeks after a training tunnel collapse killed 28 workers.
Also, a shortage of cash in top commodity consumer China is
boosting imports of copper as a financing tool, resulting in
premiums paid for spot refined metal supplies from overseas
climbing to near four-year highs.
But inventories of copper in warehouses monitored by the LME
have been climbing, which has contributed to the metal's almost
12 percent fall so far this year.
LME data showed stocks jumped 6,174 tonnes,
reminding investors of an expected surplus this year. Many
analysts say production outages including Freeport's Grasberg
mine should make the surplus lower than they had expected.
Aluminium inventories in LME-monitored warehouses have also
surged this week, with data on Wednesday showing Detroit
accepting almost 60,000 tonnes of the metal, setting a new
record high for total stocks at 5.4 million tonnes.
Benchmark three-month aluminium lost 0.6 percent to
close at $1,830 a tonne, the weakest since May 15.
"Two days of consecutive closes below $1,838 will likely set
the complex up for a retest of the May low of $1,809," Meir said
in a note.
Among other metals, lead was the biggest loser, closing 1.1
percent lower at $2,066 a tonne, a three-week low.
Zinc edged down 0.2 percent to $1,861 a tonne, tin
dipped 0.1 percent to finish at $20,100 and nickel
gave up 0.35 percent to $14,200.