Copper falls on dollar, growth concerns

LONDON: Copper fell on Thursday on a stronger dollar and concerns about demand in the United States after the Federal Reserve cut its forecasts for economic growth in the world's largest economy.

Data showing big metal consumer China's factory sector was close to stalling, and a meeting later on Thursday of European leaders over the Greek crisis also soured sentiment.

Three-month copper on the London Metal Exchange was $8,974 per tonne at 0956 GMT, down 0.5 percent from $9,020 at the close on Wednesday.

The Federal Reserve on Wednesday cut its forecasts for US economic growth, but offered no hint of further monetary support.

"In the US we have an unfortunate situation of rising inflation and a weaker outlook for growth, and the likelihood that there will not be another round of quantitative easing," Christen Tuxen, an analyst at Danske Bank, said.

"That has taken the focus off Greece but that is still looming in the background and could resurface when we have the European Council meeting this afternoon. So that is where the metals are taking their cues."

European leaders will try to convince Greeks and financial markets when they meet on Thursday and Friday that they have a workable plan to help Athens avoid a debt default.

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The stronger dollar also put pressure on metals prices, which tend to fall as the dollar rises because it makes commodities more expensive for holders of other currencies.

News that China's factory growth nearly stalled in June on weakening global demand was a further signal to investors to trim from their portfolios assets that are seen vulnerable to volatility.

But metals demand is showing signs of picking up in China, the world's largest consumer of copper. Aurubis, Europe's largest copper producer, said the China's copper imports are expected to rise in the second half of this year as it uses up its domestic stocks.

"Looking at inventory developments in China, we see further evidence that demand in the physical market is picking up," Credit Suisse said in a research note. A Swiss copper broker said: "The Chinese are definitely buying, there's no doubt about that." Bonded stockpiles in China have fallen by around 50 percent over the last two months.

Nickel fell 0.4 percent to $22,050 from $22,150 at the close on Wednesday.

The price of the metal used to make stainless steel has fallen since peaking at just under $29,500 in February, and could come under more pressure as mining companies race to increase production.

The Australian unit of China's Minmetals said on Thursday it had received interest from outside parties to operate its mothballed Avebury nickel mine in Australia.

An expected nickel supply deficit of around 30,000 tonnes this year, against consumption of 1.59 million tonnes, could reverse into a 25,000-tonnes surplus in 2012, and an 80,000-tonne surplus in 2013, according to BNP Paribas.

Lead fell 1.34 percent to $2,510 per tonne from Wednesday's $2,544 close.

Lead production cuts in China after a crackdown on polluting plants launched in May and a growing supply-demand gap will extend into July as more units shut or curtail output for repairs and cleanup, industry sources said on Thursday.

Aluminium was down 1.1 percent at $2,521 per tonne from $2,549, zinc was also down 1.1 percent at $2,227.5 from $2,253.5, and tin was down 0.8 percent at $25,150 from $25,345.

COPYRIGHT REUTERS, 2011