RTRS : Copper dips on demand woes, weak fundamentals
* Weak fundamentals and data cause cross-market selling
* Focus on inventories as nickel slides more than 5 percent
(Updates ring prices, adds detail)
By Michael Taylor
LONDON, Aug 17 (Reuters) - Copper eased on Monday as concerns over the economic recovery caused industrial metals to pull back, with investors still uncertain over the demand outlook against a backdrop of weak fundamentals.
Copper for three-month delivery MCU3 on the London Metal Exchange fell to $6,070 a tonne from $6,240 at the close on Friday and compared with a session low at $6,000.
A weaker-than-expected report from the Reuters/University of Michigan Survey of Consumers ignited cross-market selling late on Friday. [ID:nN14294408]
Adding to the negative sentiment, equity markets fell on Monday after data showing Japan's economy became the third G7 country after Germany and France to pull out of recession, failed to impress investors. [nTOPWRAP]
"It's a continuation from Friday," said Gayle Berry, an analyst at Barclays Capital. "This is the trend we've been seeing in recent months -- a week or so of very strong gains and then a pullback.
"It was to be expected. It doesn't mark the beginning of a turnaround ... the market is still positive for the outlook for the second half."
Prices of the metal, used in power and construction, fell more than 3 percent on Friday, as U.S. consumer data suggested a global economic recovery may be slow.
Highlighting weak fundamentals for industrial metals, copper stocks rose 1,175 tonnes to 294,050 tonnes.
Looking ahead, Berry added that labour contract negotiations in the coming months will be keenly watched by investors.
Concerns about supplies in the near term have pushed the red metal into a $6 a tonne backwardation -- premium for cash material over the three-month contract MCU0-3 -- compared with a discount of $40 a tonne at the end of March.
Aluminium fell $44 in rings to $1,946. LME stocks in the metal, used in transport and packaging, fell 5,075 tonnes but remain at near-record levels above 4.5 million tonnes. Aluminium has gained more than 25 percent this year, with financing deals designed to release cash for producers said to be partly behind the surge. [ID:nLL175677]
Analysts estimate about 70 percent of stocks in LME warehouses are tied up in such deals until next May.
MIXED PICTURE
"The speed of recovery in base metals prices has caught many in the market by surprise," said Societe Generale in a note. "While there has been a modest improvement in the fundamental picture for most metals, the picture is still somewhat mixed."
"China remains the key focus for metal demand recovery, driven by the infrastructure focused fiscal stimulus plan, but demand in the world ex-China remains largely subdued at best."
Chinese stockbuilding and improving economic data has boosted base metal prices this year, but with the summer lull in full swing, analysts predict price corrections this quarter.
In other base metals, steel making ingredient nickel MNI3 fell more than 6 percent to a low of $18,301 a tonne before easing back to trade at $19,005 in LME rings from $19,500.
As nickel inventories rose by 210 tonnes to 108,366 tonnes, traders will also be watching closely problems at Vale Inco's (VALE5.SA) Canadian operations. [ID:nN11527137]
Battery material lead MPB3 was last bid at $1,800 from $1,862, zinc MZN3 was traded at $1,784.50 a tonne from a last bid at $1,825 on Friday.
Tin MSN3 edged lower to a last bid of $14,050 in rings from $14,450.
Used in electrical solder, tin investors remain concerned about the scale of long or buy positions in the tin market, compared with the amount of available metal in LME warehouses. [ID:nL7149027].
Looking ahead, the market is expected to turn to New York factory data for August at 1230 GMT and a raft of housing data due later on Monday and on Tuesday for further direction.
Metal Prices at 1210 GMT Metal Last Change Pct Move End 2008 Ytd Pct
move COMEX Cu 283.40 0.00 +0.00 139.50 103.15 LME Alum 1950.00 -40.00 -2.01 1535.00 27.04 LME Cu 6090.00 -150.00 -2.40 3060.00 99.02 LME Lead 1790.00 -72.00 -3.87 999.00 79.18 LME Nickel 18950.00 -550.00 -2.82 11700.00 61.97 LME Tin 14050.00 -400.00 -2.77 10700.00 31.31 LME Zinc 1780.00 -130.00 -6.81 1208.00 47.35 SHFE Alu 14625.00 -615.00 -4.04 11540.00 26.73 SHFE Cu* 47790.00 -2430.00 -4.84 23840.00 100.46 SHFE Zin 14375.00 -645.00 -4.29 10120.00 42.05 ** 1st contract month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07 (Additional reporting by Nick Trevethan in Singapore; editing by Peter Blackburn)
