October 29, 2018 / 11:30 AM / a month ago

METALS-Copper steadies as LME supplies shrink

(Recasts and updates with closing prices)

By Pratima Desai

LONDON, Oct 29 (Reuters) - Copper prices steadied on Monday with support from shortages created by tumbling inventories on the London Metal Exchange countering concern over growth and demand because of the U.S.-China trade dispute.

Benchmark copper on the LME ended unchanged at $6,160 a tonne, having touched a session high of $6,240.

“Copper is very much being driven by availability of metal on exchange and strong physical demand,” said Kash Kamal, an associate at BMO Capital Markets. “Macro headwinds include the trade war between two of the world’s largest economies.”

STOCKS: Inventories of copper in LME-approved warehouses, at 143,125 tonnes, are down more than 60 percent since the 2018 peak near 390,000 tonnes. MCUSTX-TOTAL

The problem is compounded by cancelled warrants — metal earmarked for delivery — at nearly 54 percent of total stocks and a large holding of copper warrants between 50 and 79 percent.

SHORTS: Traders say covering of short positions ahead of month-end is exacerbating nearby tightness.

This can be seen in the premium for the cash over the three-month contract, which hit $47 a tonne on Friday, its highest since February 2015. It was last around $38 a tonne.

PROFITS: Profit growth at Chinese industrial companies slowed for the fifth consecutive month in September as sales of raw materials and manufactured goods ebbed further, pointing to cooling domestic demand.

China’s major stock indexes fell sharply on Monday as earnings reports on industrial and consumer companies sent fresh jitters through the market, raising concerns about a slowdown in economic growth.

CHINA PMIs: Growth in China’s factory sector is likely to have cooled further in October as domestic demand faltered and exporters felt a bigger sting from the intensifying trade war with the United States, a Reuters poll showed.

CHINA DEMAND: China is the world’s largest consumer of copper, accounting for nearly half of global demand estimated at about 24 million tonnes this year.

TARIFFS: Chinese tariffs on imports of scrap from the United States has driven strong demand for copper cathode.

China’s unwrought copper imports surged to their highest in 2-1/2 years in September, while copper concentrate imports climbed to a record high as the crackdown on scrap leaves it needing other forms of the metal.

DOLLAR: A higher U.S. currency, which makes dollar-denominated commodities more expensive for holders of other currencies, was weighing on prices of industrial metals because it could subdue demand.

PRICES: Aluminium ended 0.8 percent down at $1,982 a tonne, zinc fell 1.1 percent to $2,622, lead was down 2.1 percent at $1,956, tin slipped 0.9 percent to $19,125 and nickel ceded 1.2 percent to $11,755.

Reporting by Pratima Desai Editing by Louise Heavens and David Goodman

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