June 13, 2013 / 9:46 AM / 5 years ago

METALS-Copper falls to 6-week low on fear of monetary tightening

* Rio Tinto delays first export from Mongolian copper mine

* Shanghai copper falls 3 pct after holiday break

* LME nickel hits lowest level in four years

By Silvia Antonioli and Eric Onstad

LONDON, June 13 (Reuters) - Copper slid to a six-week low on Thursday as fears that central banks may curb stimulus programmes earlier than previously expected outweighed concerns about supply disruption and delay at two large copper mines.

Nickel slid to its lowest level in four years as a combination of weak demand from the stainless steel sector and oversupply weighed on the market.

Benchmark copper on the London Metal Exchange (LME) closed down 1 percent at $7,050 a tonne in open outcry activity, erasing Wednesday’s gain of 0.8 percent.

Copper, which is down 11 percent this year, later extended losses in electronic trading to a low of $7,011.25 a tonne, the weakest since May 3.

Helping to keep prices spiraling lower was news that Rio Tinto delayed an event to mark the first exports from the large Oyu Tolgoi mine in Mongolia as it awaits final clearance from the government, according to sources familiar with the situation.

Freeport-McMoRan Copper & Gold Inc on Wednesday declared force majeure to free itself from obligations to deliver copper concentrate from its Grasberg mine in Indonesia, where work has been suspended after a May accident that killed 28 people.

“The market should be supported by the news on Grasberg and Oyu Tolgoi, but prices are still on retreat because there is a massive cutback on risk assets, and economy-sensitive industrial metals prices also come under pressure when the sentiment becomes gloomy,” Commerzbank analyst Eugen Weinberg said.

“Right now the outlook for stimulus, which is one of the most supportive factors, is diminishing, so people are looking for an end of QE3 (quantitative easing) and, relatively soon, action from the ECB too, and this is weighing on the market.”

More upbeat economic data on Thursday from the United States was likely to fuel debate about the end of stimulus from central banks.

U.S. retail sales rose more than expected in May and first-time applications for jobless benefits fell last week, suggesting the economy was squeezing out of a recent soft patch.

But investors have been on edge about top metals consumer China, where risks are rising that economic growth will decline further in the second quarter after weekend data showed unexpected weakness in May trade and that domestic activity was struggling to pick up.

Shanghai copper fell on Thursday, when trading resumed after a three-day holiday, with the most active October contract dropping by as much as 3 percent to 51,350 yuan ($8,354) a tonne before paring losses.

While the decline was largely a catch-up to weakness in London earlier this week, it was indicative that traders are not overly concerned about the supply outlook.

“We are seeing a continuing lacklustre macro environment. The Chinese economy isn’t showing the necessary signs of improvement that we are all looking for,” analyst Stefan Graber at Credit Suisse in Singapore said.

On the LME, nickel was one of the worst performers, losing 1.5 percent to close at $14,060 a tonne, the lowest level since June 2009. The ingredient for stainless steel has been the worst performer on the LME this year, dropping nearly 14 percent.

“With stainless steel surcharges dropping to their lowest since 2009, buyers are in no hurry to purchase stainless steel, and this pro-cyclicality in the nickel market is helping to accentuate the already negative fundamentals depressing nickel prices,” analyst Nic Brown at Natixis in London said in a note.

LME nickel inventories has increased 30 percent this year.

Lead also was weak, giving up 1.5 percent to finish at $2,086 a tonne, a two-week low, while zinc fell 1.2 percent to $1,842.

Aluminium and tin held up better, with aluminium dipping 0.38 percent to end at $1,857 a tonne and tin edging down 0.25 percent to $20,350.

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