May 16, 2012 / 9:36 AM / 6 years ago

METALS-Copper sinks on weak euro, nears year-to-date low

* Copper close to year-to-date lows
    * Little technical support seen in near term - trader
    * Greek banks' switch to ECB emergency liquidity spooks market


    By Josephine Mason and Susan Thomas	
    NEW YORK/LONDON, May 16 (Reuters) - Copper came close to wiping out its
year-to-date gains after the red metal and the euro hit four-month lows o n
W ednesday amid mounting fears of a Greek exit from the euro zone.	
    The European debt crisis deepened with news that the European Central Bank had
stopped providing liquidity to some Greek banks. These banks have now been moved
to the ECB's emergency liquidity assistance program. 	
    Notching a fourth consecutive day of losses, traders warned that copper prices
had little technical support in the near term.	
    "Speculators are still on the sidelines and the physical market is holding
back. China's got a speed bump of inventory to deal with and clients are not doing
anything. That's the problem," a New York trader said.	
    He pegged the next support level at $3.38 per lb, about 10 cents lower than
Wednesday's settlement, but said even that was very tentative. 	
    Risk aversion rose as talks in Greece for a new government failed, forcing
another round of elections, before being briefly quelled after comments by German
Chancellor Angela Merkel and new French President Francois Hollande that they
wanted Greece to remain in the euro zone. 	
    Three-month copper on the London Metal Exchange settled at $7,665 per
tonne, down over 2 percent from $7,825 in Tuesday's official session. It earlier
fell to $7,625, its lowest since Jan. 10. Copper, which had rallied by more than
12 percent by early February, has shed almost all of its 2012 gains.	
    In New York, the July COMEX contract shed 1.12 percent to settle at
$3.478 per lb, after trading in a range of just over 6 cents on the day. 	
    That settlement is just 7 cents shy of year-to-date lows of $3.40 per lb hit
in the first few days of January.	
    Lack of investor interest and caution were visible in the volumes, with just
over 67,000 lots changing hands in late afternoon trade in New York, well below
30-day averages.	
    "One of the more concerning aspects of the global economy is China, where we
have some indicators suggesting that growth is slowing more meaningfully and that
things look perhaps a little more worrying with respect to how much support that
will give to metals," analyst Dan Brebner of Deutsche Bank said.	
    "That said, we've had a decent correction. It doesn't take much for things to
turn around, but given where we are now I think it's looking a bit overdone."	
    Data last Friday showed China's economy slowing. Industrial production growth
slowed sharply in April and fixed-asset investment -- a key growth driver -- hit
its lowest level in nearly a decade. China is the world's largest consumer of
copper. 	
    U.S. industrial production posted its fastest growth in over a year in April,
although the Federal Reserve revised its estimates for prior months.
    	
    Still, overarching macroeconomic uncertainty led Commerzbank to cut its 2012
and 2013 price forecasts for base metals on Wednesday.	
    "We believe the risks currently outweigh the opportunities. In the short term
we therefore see further correction potential for all commodities, to which base
metals will also not be immune," the bank said in a note to clients.
 	
    	
    	
    	
    CHINA BOND	
    Bonded stocks of copper in China have begun to fall sharply, which could hit
LME copper prices as well as physical premiums in China, Goldman Sachs said in a
research note.	
    The bank said bonded stocks had dropped to 550,000-570,000 tonnes from a peak
of 640,000-650,000 tonnes as of end-April. 	
    "This fall in bonded stocks reflects a reduction in the profitability of
financing deals post the LME spread tightening in mid-April. Some financing deals
likely came to an end as a result with LME short positions likely being delivered
into and exports likely to pick up to LME warehouses in the coming weeks," it
said. 	
    Other metals closed mixed. Tin finished at $19,675 from $19,810 at
Tuesday's close while zinc ended at $1,898 from $1,934. 	
    Lead ended at $1,971 from $2,008. Aluminium recovered to
$2,035 from $2,025 while nickel rose to $17,005 from a close of $16,995.	
    Indonesia's finance minister said on Wednesday the country would apply an
export duty of 20 percent to 21 metal ores and concentrates, extending a list of
14 metals, including copper and nickel, proposed earlier this month. 	
    The global zinc market was in surplus by 97,000 tonnes in the first three
months of the year, while the global lead market was in surplus by 37,000 tonnes,
a bulletin from Lisbon-based International Lead and Zinc Study Group showed.
    	
 	
 Metal Prices at 2027 GMT
                                                                                  
  Metal            Last      Change  Pct Move   End 2011   Ytd Pct
                                                              move
  COMEX Cu       346.60       -5.15     -1.46     343.60      0.87
  LME Alum      2035.00       10.00     +0.49    2020.00      0.74
  LME Cu        7649.00     -111.00     -1.43    7600.00      0.64
  LME Lead      1970.00      -38.50     -1.92    2035.00     -3.19
  LME Nickel   17000.00        5.00     +0.03   18710.00     -9.14
  LME Tin      19675.00     -135.00     -0.68   19200.00      2.47
  LME Zinc      1898.00      -36.00     -1.86    1845.00      2.87
  SHFE Alu     15900.00     -110.00     -0.69   15845.00      0.35
  SHFE Cu*     54690.00    -1260.00     -2.25   55360.00     -1.21
  SHFE Zin     14860.00     -165.00     -1.10   14795.00      0.44
 ** 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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