METALS-Copper falls to 1-month low on China, central bank fears

Tue Jun 11, 2013 9:49pm IST

* China demand outlook dim after poor data at the weekend

* Central banks could start tightening monetary policy

* Worries over supply outages in copper limit losses

By Maytaal Angel and Harpreet Bhal

LONDON, June 11 (Reuters) - Copper hit its lowest in more than a month on Tuesday, pressured by worries that central banks could soon start scaling back on stimulus measures and concerns about the outlook for demand from top consumer China.

Three-month copper on the London Metal Exchange ended at $7,065, down from a close of $7,230 on Monday.

It earlier touched its lowest since early May at $7,032 a tonne in intraday trade.

Other metals also fell sharply, with nickel dropping to its lowest level since July 2009 in intraday trade at $14,475 a tonne.

Copper's fall echoed other markets, as concerns over China added to worries that central banks could soon start tightening the ultra-loose monetary policies that have fueled rapid gains in asset prices this year.

World shares fell and yields on riskier European debt rose on Tuesday after the Bank of Japan's decision not to follow up its $1.4 trillion stimulus programme announced in April.

Also adding pressure to prices was data at the weekend from China, the world's biggest consumer of copper, showed unexpected weakness in May trade and domestic activity struggling to pick up.

"There's really no incentive for anybody to look to the buy side at the moment. In the short term, the weak Chinese data was clearly a negative," said Wiktor Bielski, an analyst at VTB Capital.

China is the world's top consumer of copper, making up around 40 percent of global demand for the metal.

"The lack of a strong recovery in Chinese demand should continue to weigh on copper prices, which we forecast to fall below $6,000 per tonne next year," Capital Economics said in a note.

Keeping prices in check were concerns about the outlook for supply of the metal used in power and construction.

Operations at the world's No. 2 copper mine in Indonesia, run by Freeport McMoRan Copper and Gold Inc, have been shut since an accident last month killed 28 workers.

Also India's top copper smelter is preparing to reopen, potentially adding to a short-term squeeze on concentrate supply. The smelter will only operate until the second week of July, however.

"A lot of the big production increases over the next few years are now in jeopardy because of financial pressure on miners, or environmental problems for example," said Matt Fusarelli of Sydney-based consultancy AME Group.

More supply is expected to hit the market, however. Global miner Rio Tinto plans to start exporting copper from the $6.2-billion Oyu Tolgoi mine in Mongolia on Friday, marking the opening of a mine that will eventually make up one-third of the country's economy.

In other metals, three-month lead ended at $2,117 from $2,164 at the close on Monday, and zinc was at $1,852 from $1,903.50.

Aluminium, untraded at the close, was bid at $1,887 from $1,940, and tin was at $20,525 from $21,050. Nickel ended at $14,535 from $15,045 on Monday.

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