February 26, 2020 / 11:44 AM / a month ago

METALS-Copper slides to 3-week low, inventories reinforce demand fears

* Premium for cash over 3-month lead at $54 a tonne

* Impact on nickel prices from potential projects delays fades (Adds closing prices, comment)

By Pratima Desai

LONDON, Feb 26 (Reuters) - Copper prices slid to three-week lows on Wednesday as large deliveries of the metal to London Metal Exchange-registered warehouses reinforced demand worries fuelled by the spread of the coronavirus beyond China.

Benchmark copper on the LME ended down 0.3% at $5,670 a tonne. Prices of the metal used by investors as a gauge of global economic health earlier touched $5,623.5, the lowest since Feb. 4.

“It really is all about the coronavirus at the moment and how it’s spreading out from China,” said Capital Economics analyst Caroline Bain.

“We thought it would be over in the first quarter and output would recover in subsequent quarters, but the virus is showing signs of lasting longer than we thought.”

VIRUS: A second European hotel was in lockdown as authorities around the world battled to prevent the spread of the virus. Italy has become a frontline in the global outbreak with 280 cases and 10 deaths. “In this type of environment, rallies remain vulnerable despite a host of commodity complexes being quite oversold,” ED&F Man analyst Edward Meir said in a note.

“Promises of central bank easing are going to be of limited value when people cannot get to work and supply chains are clogged. “

INVENTORIES: The latest data from the LME shows stocks of copper in its network of warehouses jumped nearly 40% or 61,175 tonnes to 221,425 MCUSTX-TOTAL tonnes in one day, their highest since November last year.

“People are assuming it’s because of the virus and lack of demand,” a copper trader said, adding he would be watching the stock data to see if the copper on LME warrant is cancelled - earmarked to leave LME warehouses.

NICKEL: The outbreak is likely to delay development of $11 billion worth of nickel projects in Indonesia, its minister for maritime resources and investment said.

The news lifted prices of the stainless steel ingredient.

Three-month nickel rose 0.8% to $12,550.

LEAD: The premium for the cash over the three-month lead contract has dropped to $54 a tonne CMPB0-3 from last week’s nine-year high of $68, but it still indicates concern about nearby supplies on the LME market.

Historically low lead stocks and companies holding large amounts of warrants and cash contracts are behind the concern.

Three-month lead fell 2.2% to $1,817.

OTHER METALS: Aluminium slipped 0.4% to $1,696, zinc gained 0.8% to $2,046.5 and tin ceded 0.3% to $16,680 a tonne.

OUTLOOK: Rio Tinto warned the coronavirus may create challenging conditions over the next six months, with more disruptions to global supply chains and potential delays to projects in Australia. (Reporting by Pratima Desai; Editing by Louise Heavens, David Evans and Jan Harvey)

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