May 12, 2011 / 10:07 AM / 9 years ago

METALS-Copper tumbles to 5-month low on growth blues

 * China tightening seen having desired effect
 * LME copper stocks in the spotlight
 
 (Updates prices, adds quote)
 By Pratima Desai
 LONDON, May 12 (Reuters) - Copper tumbled to a five-month
low on Thursday as investors headed for the exits, fearing
slower economic growth and demand from top consumers China and
the United States.
 Copper recovered some poise after China hiked the bank
reserve requirement ratio as the market started to think about
an end to the country's tightening cycle in China. 
 Weighing on sentiment though was the stronger dollar .DXY
across a basket of currencies, which makes commodities priced in
dollars more expensive for holders of other currencies. [USD/]
 Benchmark copper CMCU3 on the London Metal Exchange traded
at $8,655 a tonne at 1408 GMT from an earlier low of $8,504.50 a
tonne, its lowest since Dec 1. The metal used in power and
construction closed at $8,700 a tonne on Wednesday.
 The latest lurch lower started on Wednesday after data from
China showed industrial output growth eased more than expected
in April, pointing to a cooling in the world's second-biggest
economy. [ID:nL3E7GB0H2] [ID:nL3E7GC0JV]
 U.S. data showed the world's largest economy struggled to
gain momentum early in the second quarter, with retail sales
posting their smallest rise in nine months in April and
 wholesale prices increasing more than expected. [ID:nN12296928]
 "We're getting concerns about slowing growth, rising
inflation, rising interest rates, money leaving the commodities
sector," Edward Meir, senior commodity metals analyst at MF
Global, said.
 "And when markets sell off, you have a run into the dollar
which exacerbates things even more."
 China on Thursday hiked the reserve requirement ratio for
its commercial banks by 50 basis points, extending its campaign
to calm prices, the eighth rise since October. [ID:nLDE74B18Y]
 "There is a good chance that the pace of RRR (reserve
requirement ratio) increases will now slow ... Of course,
consumer price inflation is still high, but significant further
increases in the headline rate look unlikely," Capital Economics
said in a note.
 "We therefore believe that the balance of concern within
government will shift to the growth outlook and that the
People's Bank will call a halt to the tightening of monetary
conditions ... in the second half of the year."
 
 DISILLUSIONED
 Copper's close below the 200-day moving average at about
$8,760 a tonne on Wednesday is seen as a strong bearish signal.
 Also in the spotlight are stocks of copper in LME
warehouses, which at 467,725 stand nearly 35 percent above
levels seen early in December and the highest since June last
year. [0#LME-STOCKS]
 LME stocks of aluminium at above 4.59 million tonnes are
still within touching distance of the record high above 4.64
million tonnes hit in January 2010.
 But prices for the metal used in transport, packaging and
construction, have been supported by financing deals, which are
estimated to have tied up about 70 percent of LME stocks.
 An additional support for aluminium prices are power
shortages in top producer China. Power is estimated to account
for about 40 percent of aluminium smelting costs in China.
[ID:nL3E7GB095] [ID:nLDE73C242]
 "With the problem of power shortages spreading and worsening
in parts of China, it is questionable if the strong production
trends across base metals (especially aluminium and lead) can be
sustained in coming months," Barclays Capital said in a note.
 Aluminium CMAL3 traded at $2,614 a tonne from $2,611 a
tonne, zinc CMZN3 at $2,144 from $2,160, lead CMPB3 at
$2,277.50 from $2,295 and tin CMSN3 at $28,800 from $29,100.
 Nickel CMNI earlier fell to $23,791 a tonne, it lowest
since December 23 on worries about lower demand from stainless
steel mills, which account for about two-thirds of global
consumption. It traded at $24,218 a tonne from $24,550.
 
 Metal Prices at 1410 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       390.55        0.00     +0.00     444.70    -12.18
 LME Alum      2587.00      -24.00     -0.92    2470.00      4.74
 LME Cu           0.00    -8700.00   -100.00    9600.00   -100.00
 LME Lead         0.00    -2295.00   -100.00    2550.00   -100.00
 LME Nickel   23950.00     -600.00     -2.44   24750.00     -3.23
 LME Tin      28995.00     -605.00     -2.04   26900.00      7.79
 LME Zinc      2142.00      -18.00     -0.83    2454.00    -12.71
 SHFE Alu     16600.00     -100.00     -0.60   16840.00     -1.43
 SHFE Cu*     64220.00    -2120.00     -3.20   71850.00    -10.62
 SHFE Zin     16270.00     -480.00     -2.87   19475.00    -16.46
** Benchmark month for COMEX copper
* 3rd contract month for SHFE AL, CU and ZN
SHFE ZN began trading on 26/3/07
 (Editing by Alison Birrane and Jane Baird)
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