March 20, 2012 / 10:14 AM / 6 years ago

METALS-Copper sinks as China slowdown fears escalate

* Copper settles back into middle of months-long range
    * BHP sees signs of flattening iron ore demand from China
    * Dollar rises as risk sentiment sours
    * Coming up: U.S. existing homes sales data Wednesday

    By Chris Kelly and Susan Thomas	
    NEW YORK/LONDON, March 20 (Reuters) - Copper posted its sharpest decline in
two weeks on Tuesday as the dollar strengthened and concerns about the scale of
China's economic slowdown escalated, setting prices of the industrial metal back
into a familiar range.	
    Down about 2 percent, copper stood near the bottom of the biggest losers
within the 19-commodity Thomson Reuters-Jefferies CRB Index as further
proof of softening raw materials demand from China, which accounts for 40
percent of global copper consumption, led investors to unload some length.	
    Fueling the downside push was news that BHP Billiton, the world's
largest miner, was seeing signs of "flattening" iron ore demand from China.
 	
    "There is a variety of things affecting prices today including ongoing
concerns about Chinese demand and worries about higher oil prices, which are not
good for growth prospects," said Natixis head of research Nic Brown.	
    London Metal Exchange (LME) three-month copper touched a session
trough at $8,383 per tonne, its lowest level since March 6, before closing at
$8,430 per tonne, down $140.	
    In New York, the May COMEX contract slumped 7.85 cents, or 2 percent,
to settle at $3.8305 per lb, after dealing between $3.8135 and $3.91.	
    Volumes remained on the light side, with about 45,700 traded in late New
York business -- down by more than a third from the 30-day norm, according to
preliminary Reuters data.	
    Prices hit their highest level in two weeks at $8,690 and $3.94 on Friday,
and are up around 10 percent this year, but have remained mired in a trading
range for the better part of the first quarter.	
    "Prices have more or less remained rangebound since the end of January. It's
clearly the sort of tension between relatively positive developments in macro
data versus continued softness in the Chinese market," said Nicholas Snowdon,
analyst with Barclays Capital in New York.	
    "The potential to break to the downside or upside is largely going to be
leveraged to how the picture evolves in China, both in the physical market and
at a macro level."	
    Official Chinese data last week showed home prices fell in February for a
fifth consecutive month, and the government reaffirmed its commitment to
measures to control the property market and cool speculation. 	
    Chinese copper demand has not picked up after the Lunar New Year holiday in
late January, prompting importers to delay some term shipments, traders have
said. 	
    	
    DOLLAR WEIGHT	
    Also weighing on base metals was the dollar, which rose against a basket of
currencies as risk sentiment soured, partly because of concerns that a slowdown
in China could hit global growth. 	
    Gains in the dollar can pressure dollar-denominated commodities by making
them more expensive for consumers using other currencies.	
    On a more positive note, although U.S. housing starts fell last month,
permits for future construction jumped to their highest level since October
2008, according to a government report that showed steady improvement in the
housing market. 	
    In other metals, nickel ended flat at $19,050 a tonne. It is the
worst performing base metal in the complex so far this year and is up around 1
percent, compared with copper's 10 percent rise.	
    "Exchange inventories have risen over 8 percent and Chinese premiums remain
weak," RBC Base Metals said about nickel in a research note. "That said, a move
below $18,000 will begin to see a supply-side response."	
   	
    Aluminum fell $30 to close at $2,245 a tonne.	
    LME stocks held near record highs at more than 5 million
tonnes, but most of the metal is locked up in financing deals and not available
for sale.  	
    Talks are under way to end a three-month lockout of workers at Rio Tinto
Alcan's  giant Alma aluminum smelter in northern Quebec as the
two sides were summoned to the negotiating table this week. 	
    	
 Metal Prices at 1846 GMT
                                                                  
  Metal            Last      Change  Pct Move   End 2011   Ytd Pct
                                                              move
  COMEX Cu       383.70       -7.20     -1.84     343.60     11.67
  LME Alum      2244.00      -31.00     -1.36    2020.00     11.09
  LME Cu        8430.00     -140.00     -1.63    7600.00     10.92
  LME Lead      2013.00      -95.00     -4.51    2035.00     -1.08
  LME Nickel   19050.00        0.00     +0.00   18710.00      1.82
  LME Tin      23415.00     -180.00     -0.76   19200.00     21.95
  LME Zinc      2034.00      -45.00     -2.16    1845.00     10.24
  SHFE Alu     16265.00      -10.00     -0.06   15845.00      2.65
  SHFE Cu*     60350.00       50.00     +0.08   55360.00      9.01
  SHFE Zin     15885.00       10.00     +0.06   14795.00      7.37
 ** Benchmark month for COMEX copper
 * 3rd contract month for SHFE AL, CU and ZN
 SHFE ZN began trading on 26/3/07

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