Wed Jul 27, 2011 2:41pm EDT
* Copper ends down as macro-economic jitters bite
* Escondida strike pressures already tight copper market
* Aluminium, tin hit multi-week highs
* Coming up: US jobless claims, pending home sales Thurs.
(Rewrites, adds New York dateline/byline, updates with New York closing
copper price, adds analyst comments)
By Chris Kelly and Silvia Antonioli
NEW YORK/LONDON, July 27 (Reuters) – Copper closed down on Wednesday as
a firmer dollar and macro-economic concerns continued to cloud near-term
demand prospects and limit the bullish impact of a prolonged strike at the
world’s largest copper mine.
 
It was another day of divergence in the base metals complex, with
aluminum CMAL3 extending a recent rally to its highest since early June
and tin CMSN3 reaching its priciest level since mid-May at $29,000 a
tonne.
 
With deadlocked debt talks in the United States, lingering debt
troubles in the euro zone, and another round of poor U.S. economic data,
copper’s supportive supply-side fundamentals seemed to move to the
back-burner, with investors more focused on demand implications from any
potential slowdown in the global economy.
 
“Demand seems to be the most important side of the equation for all capital markets right now due to the fact that you have several concurrent themes that could drastically cut demand,” said Adam Sarhan, chief executive of Sarhan Capital.
“If the debt situation is resolved swiftly and there is no demand destruction in the ramifications of the debt situation, then the focus is going to shift back to the supply side of the equation, and the strike will re-emerge as a leading force to drive copper prices.”
 
London Metal Exchange (LME) benchmark copper CMCU3 fell $40 to end at
$9,780 a tonne.
 
In New York, the key September COMEX contract HGU1 shed 3.15 cents to
settle at $4.4465 per lb.
 
The dollar rose against a basket of currencies .DXY, making
dollar-priced commodities costlier for holders of other currencies. [USD/]
Demand prospects dimmed after data showed new orders for long-lasting
U.S. manufactured goods fell in June and a gauge of business spending plans
slipped. [ID:nN1E76Q09V]
 
“Poor economic data this morning has the markets certainly moving to
the sidelines,” said David Bouckhout, senior commodity strategist with TD
Bank Financial Group.
 
As a result, trading volumes thinned out to a little more than 30,300
lots traded late in New York, down more than a third from the 30-day norm,
according to Thomson Reuters preliminary data.
 
 
But as a six-day strike at Chile’s huge Escondida mine showed no sign
of ebbing, copper’s downside risks looked limited, even as talks between
President Sebastian Pinera and unionists at state giant Codelco appeared to
ease the threat of contagion. [ID:nN1E76Q0UG]
 
“Analyst forecasts always build in at the beginning of each year supply
losses, and I think we are already at or close to exceeding those
forecasts,” said Evan Smith, co-manager of the U.S. Global Investors Global
Resources Fund (PSPFX) — a natural resources fund with about $900 million
in assets under management.
 
“If we start to see restocking in China or more labor disruptions or
weather disruptions to supply, the copper price will probably continue to
move sideways to higher.”
 
In a Reuters poll, analysts forecast the copper market will be in a
343,150 tonnes deficit in 2011. COMMODITYPOLL16 Some think supply
tightness may push copper prices up to record levels again.
 
“Although it may take a few attempts to break the $10,000 mark, we
expect copper prices to move above that level later in the year,” Credit
Suisse said in a note.
 
END OF DESTOCKING
Inventories of copper in LME-registered warehouses rose by 700 tonnes
to 469,800 tonnes, over a third higher than in December last year.
 
MCU-STOCKS
(Graphic: r.reuters.com/hub62s )
 
High stocks of copper in the last few months raised concerns over
reduced demand in top consumer China, where consumers were seen tapping
into their domestic stocks rather than importing more material, analysts
said.
 
But the destocking phase may be close to an end.
 
“Data for the first half as a whole strongly suggests destocking in a
number of the commodities, although the most recent monthly data points
suggest this destocking may be coming to an end,” Macquarie said in a
note.
 
“For both copper and aluminium…destocking was at its strongest over
the first four months of the year, with the May and June data implying that
the market has been either better balanced (aluminium) or that producers
have started tentatively rebuilding inventory (copper).”
 
Metal Prices at 1821 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       444.40       -3.40     -0.76     444.70     -0.07
LME Alum      2644.00       -8.00     -0.30    2470.00      7.04
LME Cu        9779.00      -41.00     -0.42    9600.00      1.86
LME Lead      2690.00       15.00     +0.56    2550.00      5.49
LME Nickel   24395.00      295.00     +1.22   24750.00     -1.43
LME Tin      28745.00      145.00     +0.51   26900.00      6.86
LME Zinc      2522.00      -10.00     -0.39    2454.00      2.77
SHFE Alu     18310.00      295.00     +1.64   16840.00      8.73
SHFE Cu*     72810.00        0.00     +0.00   71850.00      1.34
SHFE Zin     19085.00      185.00     +0.98   19475.00     -2.00
** Benchmark month for COMEX copper
* 3rd contract month for SHFE AL, CU and ZN
SHFE ZN began trading on 26/3/07
(Editing by Keiron Henderson)
URL: http://www.reuters.com/article/2011/07/27/markets-metals-idUSL6E7IR0QE20110727