March 30, 2011 / 7:31 PM / 9 years ago

METALS-Copper crumbles amid Chinese demand doubts

 * Copper sinks as Chinese demand worries mount
 * Copper stocks in China, LME warehouses in the spotlight
 * U.S. copper runs into technical support at 100-day MA
 * Coming up; Chinese manufacturing data Friday  (Recasts, updates with U.S. copper closing, adds graphic, analyst comments and NEW YORK dateline/byline)
 By Chris Kelly and Rebekah Curtis
 NEW YORK/LONDON, March 30 (Reuters) - Copper prices ended sharply lower on Wednesday, on pace for their biggest monthly decline since June 2010, as weaker demand cues from China and fears about a moderation in the global economic recovery kept many bulls sidelined.
 Chinese monetary tightening measures, coupled with unrest in the Middle East, rising oil prices, euro zone debt problems and Japan's nuclear crisis have all combined to throw the magnitude of the global economic recovery into question, and with it, demand for raw materials.
 As a result, copper prices have responded, falling more than 12 percent from their mid-February peaks at $10,190 per tonne in London and $4.6575 per lb in New York, before recovering to stand in aimless ranges at quarter's end.
 "From a fundamental standpoint, it's leading a lot of people to question whether or not they want to remain long copper going into a new quarter," said Adam Sarhan, chief executive of Sarhan Capital in New York.
 London Metal Exchange copper for three-month delivery CMCU3 dropped $209 to close at $9,381 a tonne, on track for a 5 percent fall in March, its first monthly decline since June 2010.
 U.S. copper HGK1 followed suit, extending a downtrend in place since mid-February before running into some technical support near its 100-day simple moving average.
 (Graphic: link.reuters.com/zes78r )
 It settled down 7.25 cents at $4.2740 per lb.
 Trading volumes began to perk up, with more than 47,000 lots traded by 2:24 p.m. EDT (1924 GMT). This was the first time volume topped 47,000 lots since March 17, according to preliminary Thomson Reuters data.
 "All the bets were put on China," said Eugen Weinberg, an analyst at Commerzbank. "Sentiment in China is not as rosy and not as upbeat as sentiment in Europe or the U.S."
 That being said, attention will now turn to Chinese manufacturing data on Friday, where market participants will see if the country's vast manufacturing sector will recover from the six-month low hit in February. [ID:nL3E7ET1H8]
 "Are they going to maintain the growth, given that the auto sector is in doubt and imports are trending lower," asked Bart Melek, vice president and director of commodities, rates research & strategy with TD Bank Financial Group. "It's expected to move up by consensus a bit, but, if it's a disappointment, watch out."
 Despite the more cautious Chinese outlook, Jiangxi Copper Co Ltd (0358.HK)(600362.SS), the country's largest copper producer, expects China's consumption to rise by 10 percent to 12 percent this year and plans a 60 percent rise in its own production capacity by 2015. [ID:nL3E7EU1D3]
 Even data showing strong hiring by U.S. private employers failed to give the market a boost, as investors awaited Friday's closely watched government report on non-farm payrolls. [ID:nN30275708]
 TRADITIONALLY STRONG QUARTER
 Traders and analysts are waiting to see what will happen in the second quarter, traditionally the strongest in terms of demand, when China normally buys ahead of a pick-up in construction activity in the third quarter.
 "Anecdotally, something in the region of 600,000 tonnes of refined copper currently (sits) in bonded warehouses in Shanghai, with perhaps another 100,000 tonnes in the southern ports," Standard Bank said in a note.
 Also in the spotlight are LME stocks of copper, which added 225 tonnes on Wednesday, bringing total warehouse levels to 439,725 tonnes, their highest since last July.  <0#LME-STOCKS>
 In other metals, aluminium CMAL3 came within $2 of Tuesday's session peak at $2,656 per tonne, its highest since September 2008, before ending down $19 at $2,629.  Metal Prices at 3:48 p.m. EDT (1948 GMT)  COMEX copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T  Metal        Last      Change  Pct Move   End 2010   YTD Pct
                                                    move  COMEX Cu     426.85     -7.80     -1.79     444.70    -4.01  LME Alum    2629.00    -19.00     -0.72    2470.00     6.44  LME Cu      9380.00   -210.00     -2.19    9600.00    -2.29  LME Lead    2655.00    -30.00     -1.12    2550.00     4.12  LME Nickel 26025.00   -575.00     -2.16   24750.00     5.15  LME Tin    31225.00   -525.00     -1.65   26900.00    16.08  LME Zinc    2335.00    -40.00     -1.68    2454.00    -4.85  SHFE Alu   16835.00      5.00     +0.03   16840.00    -0.03  SHFE Cu*   71300.00    470.00     +0.66   71850.00    -0.77  SHFE Zin   18375.00     95.00     +0.52   19475.00    -5.65 ** Benchmark month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07  (Additional reporting by Pratima Desai in London; Editing by Walter Bagley)   

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