July 17, 2013 / 10:05 AM / 5 years ago

METALS-Copper dips after Bernanke testimony, rise in mine output

* Escondida annual copper output soars 28 pct to 1.1 mln tonnes

* U.S. Senate to hold hearing on banks owning commodities storage

* Zinc falls after large rise in inventories

By Maytaal Angel and Eric Onstad

LONDON, June 17 (Reuters) - Copper slipped from near a one-month high on Wednesday after the U.S. central bank chief repeated plans to start scaling back its stimulus programme and following news of an sharp increase in output at the world’s biggest copper mine.

Base metals markets had been nervous ahead of the testimony of Federal Reserve Chairman Ben Bernanke, who affirmed the bank would start later this year to prune its $85-billion-a-month bond-buying programme, which has been supporting financial markets.

But he also sounded a dovish tone, leaving open the option of changing that plan if the economic outlook shifted, which knocked the dollar and allowed copper to pare losses.

Three-month copper on the London Metal Exchange climbed as high as $7,046 a tonne, within reach of a near one month high hit July 11, before slipping to $6,970 a tonne by 1325 GMT, down 0.4 percent.

Copper changed hands at $6,938 a tonne, down 0.9 percent, in official midday trading before the prepared testimony from Bernanke was released, which caused the dollar to weaken.

A softer dollar makes metal priced in the greenback less costly for European and other non-U.S. investors.

Copper prices have failed to find momentum above $7,000 a tonne, though they rose to those heights earlier this month after comments favouring looser U.S. monetary policy for longer triggered a cross-commodity rally.

“(Overall) the investor community is short copper. With a more dovish tone from the Fed we could see a bit more of that short covering,” said Credit Suisse analyst Tom Kendall.

“But once you get through the summer period, we are still bearish on copper and expect to see additional supply coming through at a faster pace than demand can absorb.”

BHP Billiton, majority owner of Escondida in Chile, the world’s single-largest copper mine, said copper output at the mine rose 28 percent to 1.1 million tonnes in the 2013 fiscal year.

The news added to expectations that the copper market will record a surplus in 2013 for the first time in three years.

Adding support to prices, however, was news that China’s consumption of refined copper is likely to rise in the second half, buoyed by expected government backing for power sector investments to support economic growth.

China is the world’s largest copper consumer, accounting for about 40 percent of demand. Its economic growth slowed to 7.5 percent in the second quarter, from 7.7 percent in the first quarter, leaving a big dent in copper prices, which are down nearly 13 percent this year.

China’s commerce ministry said on Wednesday that it will soon release measures to support exports and imports, though it did not give details.

Elsewhere, the U.S. Senate committee will hold a hearing on whether banks should control physical commodities storage, a practice that detractors argue has resulted in long queues to get metals out of LME warehouses.

The queues have prompted rising spot premiums on physical markets, and have also spurred producers to crank up output in spite of falling demand, weighing on LME benchmark prices.

In other metals traded, zinc fell 1.2 percent in official trading to $1,865.50 a tonne, after daily LME stocks data showed a sharp 75,900 tonne increase in inventories to 1.077 million tonnes, near their highest level in over a month.

Lead lost 1.25 percent to $2,049 a tonne, but other metals bucked the weaker trend.

Aluminium added 0.1 percent to $1,817 a tonne in official rings, nickel climbed 0.9 percent to $13,890 and tin rose 0.2 percent to $19,500.

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