METALS-Copper droops to two-week low as demand outlook dims

Melanie Burton
Friday, 25 Oct 2013 | 4:24 AM ET

* LME nickel set for around 2.5 pct weekly rise on looming Indonesia ban

* ShFE copper hits one-month low of 51,100 yuan a tonne

* Coming Up: U.S. Durable goods orders

* CFTC trader data for week of Oct. 4 due on Friday

(Recasts, updating prices)

SINGAPORE, Oct 25 (Reuters) - London copper sagged on Friday to its lowest in two weeks and Shanghai metal hit its weakest in more than a month as fitful global factory growth and fears China will clamp down on credit reinforced a dim outlook for copper.

Copper demand growth in top consumer China while healthy, is slowing in pace, and swelling supply has blunted price momentum, consigning copper to a $7,000-$7420 range since early August.

Also hurting risk appetite short term, China's money rates shot up this week to their highest levels since June's dramatic cash crunch as regulators signalled they are considering mild tightening to get rising property prices and inflation under control.

"The longer China prolongs the recent tightening, the more it's going to squeeze out liquidity and raise the risk of a more significant pull back in demand in general," said Thomas Lam, chief economist at DMG & Partners Securities in Singapore.

"The best growth years for China are probably behind us," said Lam, adding that there was little in the way of global growth prospects to give metals prices a lift.

Factories in China boosted production this month, but U.S. manufacturing output fell for the first time in four years while the euro zone economy lost momentum, surveys on Thursday showed.

And analysts expect the global copper market to post a surplus of 182,000 tonnes this year, up from a previous forecast of 153,000 tonnes before ballooning to 328,000 tonnes in 2014, according to a Reuters poll this month.

Three-month copper on the London Metal Exchange fell to $7,113, its lowest since Oct. 11 before trading at $7,134.25 a tonne by 0712 GMT, down 0.6 percent from the previous session.

Prices were set to close the week down by around 1.6 percent and remain around 10 percent off this year and traders said the metal's technical outlook has sharply deteriorated, flagging more losses to come.

The most-traded January copper contract on the Shanghai Futures Exchange shed 1 percent to end at 51,150 yuan ($8,400) a tonne, earlier sliding to 51,100, its lowest since Sept. 18.

Growing expectations the United States will start curtailing its huge bond-buying program only next year were keeping the dollar near a two-year low against the euro, cushioning metals.

A weaker dollar makes metals cheaper for holders of other currencies.

LME nickel was set to log gains of around 2.5 percent for the week, as prospects Indonesia may turn off supply next year triggered a technical rally.

In other news, Greenland's parliament voted on Thursday to end a decades-long prohibition on mining for radioactive materials like uranium, further opening up the country to investors from Australia to China eager to tap its vast mineral resources.

The U.S. Commodity Futures Trading Commission will release its weekly commitments of traders reports over the next two weeks as it resumes functions after the partial U.S. government shutdown, starting with the report for Oct. 4 on Friday.


Three month LME copper

Most active ShFE copper

Three month LME aluminium

Most active ShFE aluminium

Three month LME zinc

Most active ShFE zinc

Three month LME lead

Most active ShFE lead

Three month LME nickel

Three month LME tin

($1 = 6.0820 Chinese yuan)

(Editing by Richard Pullin and Muralikumar Anantharaman)