August 29, 2018 / 12:20 PM / 3 months ago

METALS-Worries over Chinese demand weigh on copper prices

* Discount for cash over 3-month copper contract narrows

* Alumina prices help fuel aluminium’s climb to 2-month high (Updates with closing prices, adds comment)

By Pratima Desai

LONDON, Aug 29 (Reuters) - Copper prices eased on Wednesday due to worries about demand in top consumer China after a state planning official said there were increasing risks to growth in the second half of the year.

Benchmark copper on the London Metal Exchange ended down one percent at $6,086 a tonne. It touched a two-week high of $6,167 a tonne on Tuesday.

“The warning about Chinese growth spooked the market and on top of that the dollar is up,” a copper trader said, adding that manufacturing surveys for China due later this week could trigger volatility.

GOALS: The head of China’s National Development and Reform Commission said the government needed to step up efforts to achieve key development goals.

TRADE: Amid an escalating trade dispute with Washington, China’s economy showed signs of further cooling last month with investment growth at a record low and consumers turning more cautious about spending.

DOLLAR: A higher U.S. currency makes dollar-denominated commodities more expensive for non-U.S. firms, potentially dampening demand. It is also a relationship used by funds to generate buy and sell signals using numerical models.

PMI: China’s official Purchasing Managers’ Index (PMI) due on Friday is expected to show a reading at 51 from 51.2 in July, according to a Reuters poll.

STOCKS: Cancelled warrants or metal earmarked for delivery in warehouses registered with the LME have surged to a one-year high above 132,200 tonnes, nearly 50 percent of the total at 267,850 tonnes. MCUSTX-TOTAL

Cancelled warrants on Aug. 16 were below 25,000 tonnes.

SHFE ARBITRAGE: Traders say the cancelled metal is heading for China as prices on the Shanghai Futures Exchange at around $7,150 a tonne are much higher than on the LME and the gap is wide enough to cover shipping, taxes and make a profit.

SPREADS: Worries about shortages on the LME market have seen the discount for the cash over the three-month contract narrow to $12 a tonne from $42 a tonne on Aug. 15. MCU0-3

CHINA ALUMINA: China is shipping unusually high volumes of alumina for a second time this year to an international market desperate for the ingredient used to make aluminium, traders and analysts said, even as domestic prices rise and put pressure on smelters.

ALUMINIUM: Rising input costs such as alumina and energy helped the aluminium price hit a two-month high of $2,178 a tonne earlier. It ended up 1.8 percent at $2,172.

“Technicals are pointing to a possible breakout should prices take out $2,147 on a two-day closing basis and a further advance to $2,200 cannot be ruled out,” said INTL FCStone analyst Edward Meir.

PRICES: Zinc fell 1.1 percent to $2,512, lead added 0.2 percent to $2,087, tin eased 0.6 percent to $18,940 and nickel slid 1.3 percent to $13,500 a tonne.

Reporting by Pratima Desai; Additional reporting by Manolo Serapio Jr.; Editing by David Evans, Mark Potter and Kirsten Donovan

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