Copper falls

Copper fell to its lowest level in more than a week.

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Copper fell to its lowest level in more than a week on Friday as a second-straight month of soft US employment growth fed worries about the health of the global economy, while tight supplies of the metal outside of China kept losses in check.

Copper registered a 3 percent drop for the week, snapping two straight weeks of gains and falling in line with other growth-sensitive markets like equities and crude oil. Those markets fell after the Labor Department said US employers cut back on hiring in April more than expected.

Copper's losses paled in comparison with crude oil, which plunged over 3 percent to trade below $100 for the first time since February.

“At their highs in March and April, the stock market and energy markets were pricing in a much stronger economy. Copper never really priced in that strong of an economy, so it doesn't have as much to take out,” said James Bianco, president of Bianco Research Group in Chicago.

“You've got the US economy slowing, the Chinese economy slowing ... that's why we're nowhere near $4.50 per lb or why we never got over $4 this year.”

London Metal Exchange (LME) benchmark copper plumbed an intraday low at $8,146 per tonne, its cheapest level since April 25, before ending the day with a $54 loss at $8,175.

In New York, the COMEX July contract fell 1.50 cents to settle at $3.7210 per lb, after dealing between $3.7025 and $3.7550.

Volumes remained on the light side, with a little more than 54,000 lots traded late in New York - about a third below the 30-day norm, according to preliminary Thomson Reuters data.

US employers added just 115,000 workers to payrolls last month, or 55,000 less than economists expected. The unemployment rate fell to a three-year low at 8.1 percent, but only because the workforce shrank as people retired or stopped looking for work.

“The macro numbers are becoming worse, especially in the US, so it's going to be difficult for a lot of these metals to hold up,” Edward Meir, an analyst at INTL FCStone, said.

“The French elections will also be important, because then the euro might move on that and give the market a bit more direction,” he said, referring to polls over the weekend.

Market players said they expect large Chinese copper smelters and trading firms to export refined copper cathodes to LME-registered warehouses over the next two months to help ease tight global supplies and trim near-record stockpiles at home.

As a result, thousands of tonnes of refined copper could go into LME warehouses, boosting inventories and slashing steep premiums of spot prices over those for later deliveries.

“Copper might get down to $7,800 a tonne during the course of the month. The $8,000 level keeps holding up, but this level could break once the stock picture changes. If you start seeing accumulations for a few days in a row, then that's when the pressure will be on,” Meir said.

Inventories of copper in warehouses monitored by the Shanghai Futures Exchange fell 4.0 percent from last Friday to their lowest since February, data showed. Copper stocks in LME-monitored warehouses fell by 4,575 tonnes to 230,625 tonnes, a low dating back to October 2008.

SUPPLY RESPONSE

Investors were balancing this with supply tightness worries as Chile once again struggled with lower-than-expected copper production and labour action, which heightened risks to supply.

A protest took place this week at Chile's giant Escondida copper mine, the world's largest, as a group of contract workers blocked some roads to the deposit in a dispute over bonuses.

Although majority owner BHP Billiton said on Thursday output had not been affected, worries lingered.

“People are skeptical of miners' comments as producers always tend to underestimate production disruption. They said the same last year and then they actually were impacted,” Credit Suisse analyst Ivan Szpakowski said.

Also highlighting supply scarcity, first-quarter copper production at Chilean miner Antofagasta fell 13 percent on the previous three months amid rising development costs, the London-listed firm said.

“With real demand in China now starting to increase and global industrial output trending higher, the ability of supply to respond is likely to drive relative performance in H2,” Macquarie said in a research note.

In other metals, nickel futures ended up $300 at $17,575 a tonne, supported by news that Indonesia will impose a new 20 percent export tax on 14 mineral ore exports including copper, gold and nickel from Sunday and will prohibit the shipment of raw minerals unless miners submit plans to build smelters.

This is likely to hit exports of nickel and bauxite to China and push ore prices higher, an industry source said. - Reuters

Source: http://www.iol.co.za/copper-falls-1.1289870

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