Copper gains but 20-month lows in sight

By Reuters Time of article published Jun 21, 2013

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London - Copper crept back from a 20-month low on Friday but remained on track for a third weekly fall on fears of a slowdown in China's economic growth.

Three-month copper on the London Metal Exchange was up 0.7 percent at $6,817 at 12:55 SA time, off an intraday low of $6,692 a tonne, its weakest since October 2011. It closed at $6,770 on Thursday.

BNP Paribas analyst Stephen Briggs cited two factors supporting the price.

“One is that there appeared to be some intervention by the central bank in China to stabilise the situation with the liquidity crunch,” he said.

“Also losses have been pretty substantial in the last few days, and you always get some kind of bounce.”

Base metals, along with other financial markets, have been hammered after the US Federal Reserve said on Wednesday that by mid-2014 it would curb its programme of monthly liquidity injections, which had fuelled many of the highs achieved by commodity prices since the financial crisis.

Fears of an immediate banking crunch in China eased overnight on market talk the central bank had guided the biggest state lenders to provide more short-term funds to smaller banks.

China's short-term funding rates remain elevated, however.

Indicating poor demand for copper, data out earlier showed inventories in warehouses monitored by the Shanghai Futures Exchange rose 3.2 percent from last Friday, while daily LME data showed stocks rose by 21,725 tonnes to 664,850, their highest level in a decade.

Data on Thursday showed China's factory activity had weakened to a nine-month low in June, heightening the risk of a sharper second-quarter slowdown and helping push copper to a 20-month low early in the session.

Lending copper some support, however, Chinese refined copper imports rose to 232,155 tonnes in May from April's 183,023 tonnes, although they were down 23.15 percent year-on-year, customs data showed earlier.

Aluminium fell 0.53 percent to $1,787.50 a tonne, having earlier hit $1,787 a tonne, its lowest level in more than three years.

“We think aluminium could come under additional selling pressure, with LME aluminium stockpiles hitting record high levels of 5.43 million tonnes,” ANZ said in a report.

“High supply in the market appears to be offsetting reports of China's government looking to block plans to build 10 million tonnes of new lower cost capacity in the Xinjiang province alongside recent smelter cuts.”

Tin slipped 0.16 percent to $19,469 a tonne, unfazed by news that Indonesia, the world's top exporter, plans to revise export rules from next month to push for physical trading and price-setting on the domestic market.

The metal had tumbled to its lowest in 9-1/2 months on Thursday. - Reuters

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