Thursday, 28 June 2012 21:31
LONDON: Copper edged down on Thursday after three days of gains, as investors grew sceptical that a European Union summit would succeed in tackling a regional debt crisis that has eaten into metals demand and impacted major world economies.
EU leaders opened the summit earlier as divided as ever on how to resolve the debt crisis, with Germany still showing little willingness to back other countries' debts as finance officials work on short term ways to stabilisie Spanish and Italian borrowing costs.
US data meanwhile offered little support. US consumer spending and export growth were not as robust as previously believed in the first quarter, though jobless claims fell last week while first quarter economic growth numbers met market expectations.
Benchmark three month copper at the London Metal Exchange fell 0.53 percent to $7,365.75 a tonne at 1451 GMT. It rose as high as $7,449.50 in Asian trade before dipping into the red as the European session got under way.
"The Germans we know are not going to back common (EU) debt. Metals are very macro sensitive and have been completely battered by broader market risk aversion," said Andrey Kryuchenkov, analyst at VTB Capital.
"In the long run copper should benefit from a seasonal demand recovery in China in the second half. We've already seen shrinking bonded warehouses stocks in Shanghai. But for people to buy this story we need to have an improvement in macro sentiment."
Copper has slid about 13 percent so far this quarter and is down 4 percent this year, but the market has moved into backwardation, where nearby prices are higher than forward ones, indicating some tightness.
Cash copper was at a premium to three months of up to $21 on Wednesday compared to a discount of $10 early last week.
COPPER DRAWDOWNS IN CHINA
In China, the most-active October copper contract on the Shanghai Futures Exchange gained 0.9 percent to close at 54,200 yuan ($8,500) per tonne.
Copper is trapped in narrow ranges due to longer-term worry about the global economy and with demand from top consumer China still largely sluggish, said a Shanghai-based trader.
Copper faces resistance at around $7,500 and will see support at $7,250 to $7,300, the trader said.
But market players said they were seeing more copper drawdowns from Chinese bonded warehouses due to cheaper prices and an improved LME-Shanghai arbitrage, with LME three-month copper trading at a premium of 369 yuan on Thursday, well below the nearly 4,000 yuan in early May.
In London, three month aluminium fell 1.44 percent to $1,845 a tonne, after Shanghai aluminium futures rebounded by 2 percent.
The gains in China came after losses in previous days were regarded as overdone in reaction to news that China's top aluminium-producing province cut the electricity fees of smelters in a bid to revive output.
In Australia, Rio Tinto said its Bell Bay aluminium smelter reached a new power supply deal to secure its long-term future.
Galvanising metal zinc jumped 1.15 percent to $1,776.25 a tonne, bouncing back after six days of losses that shaved 7.6 percent off the price.
The move also came as LME data showed 113,925 tonnes of net inventory cancellations. LME zinc stocks have surged 21 percent this year to 995,425 tonnes.
Tin fell 0.43 percent to $18,620 a tonne while battery material lead edged up 0.03 percent to $1,760 a n d n i ckel was at $16,209, down 0.25 percent.
Copyright Reuters, 2012