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METALS-Copper hits 2-week low on outlook for demand, surplus

Susan Thomas
Friday, 25 Oct 2013 | 8:47 AM ET

* China regulators signal credit tightening

* Analysts flag increasing surplus of copper

* Coming Up: U.S. Durable goods orders

(Updates with official prices, adds comments)

LONDON, Oct 25 (Reuters) - Copper fell on Friday to its lowest in two weeks on expectations for a growing surplus, patchy data on global factory growth and fears top consumer China would clamp down on credit.

Copper has traded in a $7,000-$7,420 range since early August due to swelling supply and to slower demand growth in China.

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

Three-month copper on the London Metal Exchange fell to $7,113, its lowest since Oct. 11, before trading at $7,134 in official rings from $7,175 at the close on Thursday.

Prices were on track to close the week down by around 1.6 percent, or a fall of around 10 percent for this year. Traders said copper's technical outlook had deteriorated, flagging more losses to come.

"It's partly a concern about Chinese credit tightening, which is weighing on sentiments," Citi analyst David Wilson said. "We also had Chinese production data, which for some metals was really quite phenomenally strong."

China's refined copper production rose 10.6 percent to a record in September from the previous month due to higher output from new smelting capacity and as increased supply of raw materials boosted operations at existing plants.

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, and then balloon to 328,000 tonnes in 2014, according to a Reuters poll this month.

A mixed picture for factory growth also weighed on copper. Factories in China boosted production this month, but U.S. manufacturing output fell for the first time in four years, and the euro zone economy lost momentum, surveys showed this week.

A weaker dollar helped limit copper's losses. A weak U.S. currency makes it cheaper for foreign investors to purchase dollar-priced commodities, thus supporting prices.

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

In other metals, three-month aluminium was at $1,854.50 in rings from $1,175 at the close on Thursday, while lead was at $2,172.50 from $2,173.50. Tin was at $22,830 from $22,875, and nickel was at $14,475 from $14,650. Zinc, untraded in rings, was bid at $1,928 from $1,936.

PRICES

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)

(Additional reporting by Melanie Burton in Singapore; editing by Jane Baird)