LONDON Copper dropped to a one-month low on Monday as concerns about poor physical demand in China and uncertainty over Beijing's next moves to support its economy prompted selling ahead of growth data from the country this week.
Benchmark copper on the London Metal Exchange (LME) fell 0.4 percent to close at $8,094.50 a tonne in the second session of losses after touching a low of $8,050, the weakest since September 13. Volumes were thin with traders distracted by LME Week, the annual gathering of the industry in London.
Recent numbers from China have clouded expectations over whether it will take more steps to shore up growth, with a decline in its annual consumer price inflation pointing to ample room for policy easing but a strong rebound in September exports suggesting policy changes may not be needed for now.
The losses on Monday threatened to send copper decisively below a range it has held over the past month of about $8,100-$8,400 a tonne as investors zeroed in on sluggish demand after the market got a shot in the arm from central bank stimulus measures.
"Copper trading is rangebound at the moment as in the short term the situation is still uncertain and investors are waiting for the Chinese GDP data and for news from LME Week," T-commodity consultant Gianclaudio Torlizzi said.
"But in a long-term perspective, I think the price is more interesting as if on one hand it's true that copper stocks are high, on the other hand we expect China to soon implement stimulus policies which should boost the economy and metals demand."
China is the world's biggest buyer of copper and it consumed about 40 percent of global supply in 2011.
While China's September copper shipments rebounded 11 percent from a month earlier, analysts said this was due to bookings made late last year and did not reflect a revival in underlying demand. Compared to a year ago, September imports were also up just 3.8 percent - the slowest in 13 months.
In Chinese physical markets, traders said spot sales were still hit by weak downstream demand.
Softer demand in China and attractive prices on the LME compared with those quoted on the Shanghai Futures Exchange (SHFE) are pushing Chinese refiners to export more material, analysts said.
For example, Jiangxi Copper Company Ltd (0358.HK) (600362.SS), the top copper producer in China, plans to cut domestic sales and increase exports next year to take advantage of strong LME prices, a senior executive said.
Goldman Sachs downgraded its three-month nickel forecast to $16,500 a tonne compared with its estimate of $17,000 in June. Three-month nickel was little changed on Monday, closing up $20 at $17,095 a tonne.
"Broadly speaking we have been, and continue to be bearish on nickel market fundamentals, mainly due to an expectation of substantial supply growth," analyst Max Layton said in a note.
Goldman expects a global market surplus of 47,000 tonnes this year and a surplus of 35,000 tonnes in 2013.
Technological improvement is set to place downward pressure on the high end of the nickel cost curve, with about 400,000 tonnes of capacity of low-cost RKEF nickel currently under construction in China, the note added.
Goldman also has become less bullish on aluminum, cutting its three-month price outlook to $2,000 a tonne from $2,200 and its six-month forecast to $2,150 from $2,400.
"Our moderation in view reflects the fact that Chinese low-cost supply has come online more quickly than anticipated, that costs of production are not under as much upward pressure as anticipated, owing to weak global demand," the note said.
Three-month LME aluminum finished 1.6 percent lower at $1,963.50 a tonne.
Tin ended 1.0 percent weaker at $21,095 a tonne, galvanizing metal zinc lost 1.1 percent to $1,915.50 and battery material lead gave up 1.2 percent to $2,106.
Metal Prices at 1618 GMT Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T
Metal Last Change Pct Move End 2011 Ytd Pct
COMEX Cu 368.70 -1.80 -0.49 344.75 6.95
LME Alum 1963.50 -31.50 -1.58 2020.00 -2.80
LME Cu 8098.50 -141.00 -1.71 7600.00 6.56
LME Lead 2104.25 -26.75 -1.26 2034.00 3.45
LME Nickel 17095.00 20.00 +0.12 18650.00 -8.34
LME Tin 21050.00 -265.00 -1.24 19200.00 9.64
LME Zinc 1911.00 -24.00 -1.24 1845.00 3.58
SHFE Alu 15495.00 -25.00 -0.16 15845.00 -2.21
SHFE Cu* 58550.00 -430.00 -0.73 55360.00 5.76
SHFE Zin 15175.00 -100.00 -0.65 14795.00 2.57 ** Benchmark month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07
(Additional reporting by Carrie Ho in Shanghai; Editing by Anthony Barker)