March 1, 2013 / 12:01 PM / 4 years ago

METALS-Copper hits three-month low as dollar, China data drag

6 Min Read

* China's factory growth slows, demand lags
    * Dollar rises to six-month high vs basket of currencies
    * U.S. manufacturing grows at best pace in 1-1/2 years in Feb

    By Susan Thomas and Maytaal Angel
    LONDON, March 1 (Reuters) - Copper fell to its lowest in more than three months
on Friday, burdened by a strong dollar, cooling factory growth in major metals
consumer China and worrying economic and political signals from Europe and the
United States.
    China saw February factory growth slow to multi-month lows as sluggish domestic
demand added to the effect from already depressed foreign sales, two separate
Purchasing Managers' Index (PMI) surveys showed. 
    Three-month copper on the London Metal Exchange touched its lowest
since November last year at $7,652 a tonne, and ended down at $7,700, down from a
closing bid of $7,815 on Thursday. Prices fell more than 4 percent in February.
    Tin, nickel, zinc, lead and aluminium all hit multi-month lows.
    "The weak Chinese data shocked the market," Societe Generale analyst Robin Bhar
said. "In the euro zone, weak manufacturing PMIs haven't helped. We've had a slew
of negative news in the last 24 hours."
    PMI surveys showed activity in France, the euro zone's second-biggest economy,
has now contracted for a year. In Britain, figures showed that manufacturing shrank
unexpectedly last month, tilting the country towards a third recession in four
years. 
    This added to concerns that political instability in Italy may push up
borrowing costs for struggling European countries.
    The dollar rose to its highest in six months against a basket of currencies
 as the euro fell to a 2013 low on the poor euro zone data. A stronger dollar
makes metals more expensive for holders of other currencies. 
    Markets were also looking to the United States where sweeping budget cuts are
set to begin. The White House and Republicans have blamed each other for a failure
to prevent a fiscal crisis which the International Monetary Fund warned could slow
the U.S. and world economies. 
    "The next level of support on copper comes in at $7,650, but a break below and
there isn't much in the charts until $7,500," RBC said in a research note. 
    "At $7,500 though, we would think the market will start to see real Chinese
interest as the arbitrage should begin to favour buying London."
    Putting a floor under prices, however, data showed the pace of growth in the
U.S. manufacturing sector picked up to its fastest rate in over a year and a half
in February as new orders continued to accelerate. 
    Other U.S. data sent mixed signals. Consumer spending rose in January in line
with forecasts, but income tumbled the most since January 1993. Construction
spending unexpectedly fell in January.  
            
    STOCK RISE
    "Overnight we also had a large rise in Shanghai stocks and LME stocks," Bhar
said. "Everything is pointing to very weak markets and the only way for prices to
move is to head down to allow prices to realign with the very much weaker
fundamentals."
    Signalling weaker demand, copper stocks in warehouses registered by the London
Metal Exchange (LME) rose by a net 12,075 tonnes, bringing LME stocks of the metal
to 458,775 tonnes, up 43 percent so far this year and a new high since Oct. 2011.
    Copper stocks registered on the Shanghai Futures Exchange climbed by 18,500
tonnes to 226,000 tonnes this week, bringing them to almost the same level as the
record high they hit a year ago.
    Physical trade in top consumer China is still quiet after the Lunar New Year
but should start improving this month, analyst Sijin Cheng at Barclays Capital in
Singapore said.
    Three-month zinc ended at $2,021 a tonne from $2,065 on Thursday,
having earlier hit its lowest since mid-January at $2,016.75.
    Aluminium ended at $1,975 a tonne from $2,011, having earlier hit its
lowest for three months at $1,956 a tonne, while nickel ended at $16,605
from $16,605, having also hit its lowest in three months, at $16,372.
    Tin closed at $23,250 a tonne from $23,400 at the close on Thursday,
having hit its lowest since mid-December at $22,851; and lead at $2,244 a
tonne from $2,281, having hit its lowest since mid-December at $2,225.
 Metal Prices at 1710 GMT
 Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T
  Metal            Last      Change  Pct Move   End 2009   Ytd Pct
                                                              move
  COMEX Cu       349.35       -4.40     -1.24     334.65      4.39
  LME Alum      1974.50      -36.50     -1.82    2230.00    -11.46
  LME Cu        7700.00     -170.00     -2.16    7375.00      4.41
  LME Lead      2243.00      -38.00     -1.67    2432.00     -7.77
  LME Nickel   16605.00        0.00     +0.00   18525.00    -10.36
  LME Tin      23150.00     -250.00     -1.07   16950.00     36.58
  LME Zinc      2020.00      -45.00     -2.18    2560.00    -21.09
  SHFE Alu     14675.00     -140.00     -0.94   17160.00    -14.48
  SHFE Cu*     56720.00     -920.00     -1.60   59900.00     -5.31
  SHFE Zin     15460.00     -195.00     -1.25   21195.00    -27.06
 ** Benchmark month for COMEX copper
 * 3rd contract month for SHFE AL, CU and ZN
 SHFE ZN began trading on 26/3/07

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