Copper slips to three-week low

Copper fell to a three-week low on Monday, dragged down by signs of cooling in top consumer China and holidays across most of Europe, but prospects for demand revival later this year deterred sellers. Benchmark copper on the London Metal Exchange was untraded at the close but bid at $8,910 a tonne from $8,938 at Friday's close. It hit its lowest since May 24 at $8,864.75 but remained some way from its May trough near $8,500, which was its cheapest since December.
"We're still in this phase where people are starting to worry about the economic recovery," Standard Chartered analyst Daniel Smith said. "The dollar has generally been strong and this is in line with risk aversion which is creeping in." Markets continued to digest last week's Chinese trade data, which showed tepid copper imports. On Monday, data showed China's money growth slowed to a 30-month low in May and banks extended fewer new loans than expected.
Chinese inflation data will be watched for fresh indications as to whether Beijing is successfully taming inflation and for a clearer view on a still mixed picture for copper consumption. Consumer and producer price indexes are due Tuesday. "If the measures being taken in China are genuinely having an impact on inflation, then that's very good news for the metals," said analyst Nic Brown at Natixis.
A London trader said "bits and pieces" of bargain hunting from the Far East had come in to support copper but demand was muted due to holidays in much of Europe and a stronger dollar. "With much of Europe shut we expect the market to drift a little bit lower... the question is how long it will be before the buyers step in," he said. "I don't expect prices to fall back to $8,500, I think we will see support around $8,800."
The euro was under pressure as worries over policymakers' attempts to handle the Greek debt crisis prompted investors to cut exposure. It managed some gains against the dollar on some central bank demand. On copper, Macquarie reiterated its expectations demand will gain pace over the second half as Chinese purchases revive and as a result of healthy demand in other parts of the world.
"Gradually over the next one to two months, we see Chinese imports rising given China could continue to de-stock at recent rates for an absolute maximum of three to four months before it runs out of copper," it said in a note. "This increase in imports very likely by end 3Q/4Q11 in the face of relatively strong ex-Chinese consumption is set to result in a drawdown in LME inventory through 2H11, so we are watching Asian cancelled warrants closely."
Copper stocks fell from more than one-year highs, data showed on Monday, by 2,175 tonnes net, mostly due to a 1,475 tonne shipment out of South Korea's Busan. Aluminium was untraded at the close but bid at $2,590 from $2,619 a tonne. Premiums for material traded tomorrow against the next day spiked to $25 backwardation.
The trader said this reflected a lack of liquidity due to the European holidays, with stragglers who did not roll their positions for Wednesday's prime June prompt date last week now scrambling to find material. Tin was untraded at the close but bid at $24,795 a tonne from $25,400. It hit its lowest since December at $24,450 given slow summer demand prospects and thin market conditions.
Zinc ended at $2,248 from $2,260 a tonne and battery material lead ended at $2,535 a tonne from $2,545. Nickel hit its lowest since November at $22,195 a tonne. It closed at $22,275 from $22,850 a tonne. European stainless steel producers' profits look set to shrink in the normally strong second quarter as prices for their products fall and customers opt to work off stocks rather than make fresh purchases.