LONDON — Reuters
Published on Friday, Oct. 30, 2009 11:34AM EDT
Last updated on Friday, Oct. 30, 2009 11:35AM EDT
Copper HG-FT prices edged lower on Friday as worries over still weak demand resurfaced, temporarily outweighing optimism garnered from better-than forecast U.S growth data.
Benchmark copper on the London Metal Exchange traded down at $6,625 (U.S.) a tonne at 1023 GMT from a close of $6,664.50 on Thursday, when the metal used in power and construction closed up nearly 4 per cent on the day.
On Thursday, Washington's first estimate of U.S. gross domestic product showed the economy expanded at an annual rate of 3.5 per cent in the third quarter, suggesting it was emerging from the worst recession in 70 years.
“GDP is the reason for the recent upward blip but I think the reality will be short lived,” said GFMS managing director Neil Buxton. “There's a fair amount of good news priced into copper, any upward move is limited in nature.”
Copper prices have more than doubled in the year to date, boosted by a declining dollar, large fund flows and record import buying from China, the world's largest metals consumer.
More recently, worries the Chinese will reduce import buying in the fourth quarter have capped gains, especially as demand in the OECD can not yet make up for reduced Chinese buying.
LME copper stocks continue rising, indicating weak demand outside China. Latest data showed stocks rose 800 tonnes to total 372,200, the highest level in more than five months.
In Shanghai, copper stocks monitored by the Shanghai Futures Exchange rose 7 per cent from one week earlier.
China's refined copper imports surged by more than a quarter in September, but analysts think it is only a matter of time before the buying subsides.
“For the October (Chinese import) data there may be a big negative surprise. The demand outlook for the Western world is still pretty muted. People have been looking at the market through rose-tinted spectacles. People need to put in a blue tint,” said Evolution Securities analyst Charles Kernot.
Even in Asia, the engine of economic growth, demand is being tempered by high prices. Physical metals premiums have tumbled in the past two weeks on falling consumer interest after steep rallies in metal prices.
On Monday, copper touched a 13-month high of $6,732, and the metal is on track for a 7.6 per cent monthly gain after September's decline.
Among other industrial metals, aluminum AL-FT , used in transport and packaging, was down at $1,950 from $1,955.
LME inventories fell 5,550 tonnes but remained near record levels of around 4.5 million tonnes. Inventories in Shanghai rose 2 per cent on the week, while zinc stocks surged to 145,536 tonnes from 117,706 tonnes.
Zinc, used to galvanize steel, fell to $2,230 from $2,265, under pressure from the Shanghai stocks data, but still on course for a 13 per cent gain this month.
“Rising zinc prices have encouraged small smelters to run at full capacity. Their products ... are flooding the market,” said Liu Xu, an analyst at China International Futures. “Consumption is slowly ebbing. I expect zinc stocks to keep rising because smelters are unlikely to cut production any time soon.”
In other metals traded, battery material lead was at $2,349.25 from $2,365, tin was at $14,900 from $15,000 and steel-making ingredient nickel was at $18,575 from $18,690.
