RTRS; Copper flat as inventory falls, offsets China
* Copper inventories, Chinese arbitrage fall
* Chinese economic slowdown seen; aluminium in focus
* COMING UP: Weekly U.S. mortgage market index at 1100 GMT
(Recasts, adds comments/details, changes dateline pvs
SINGAPORE)
By Michael Taylor
LONDON, Aug 18 (Reuters) - Copper was little changed on
Wednesday, having hit a one-week high earlier in the day, as
inventory declines offset concerns about slowing demand in top
metals consumer China.
By 0955 GMT, copper for three month delivery CMCU3 on the
London Metal Exchange traded at $7,390 a tonne, up from $7,382
at the close on Tuesday. London copper, used in power and
construction, earlier touched a one week high at $7,409.
"Flat as a pancake (but) fantastic prices," said Max Layton,
associate director at Macquarie. "Copper is at double the cost
of production. Inventories falls are going to keep happening,
and people are going to continue to be surprised."
A growing trend of declines in LME inventories has boosted
overall sentiment in recent weeks. Latest LME data showed that
copper stocks fell 1,725 tonnes on Tuesday to 403,300 tonnes,
having fallen from 6-1/2 year highs at 555,075 tonnes in
mid-February.
A recent rise in cancelled warrants -- material earmarked
for delivery -- also buoyed sentiment. On Tuesday, copper
cancelled warrants were at 30,950 tonnes or 7.7 percent of total
stocks, up from 14,875 tonnes in mid-April.
But the relative strength of LME copper, which is flat on
the year, versus Shanghai, which is 3 percent down, has
effectively locked out nearby arbitrage plays.
"The Chinese price has been the driver through 2009 and
first half of this year, but it has also been through periods of
pullback," Layton said.
"The thing holding the LME price from going the next leg
higher, is that right now, the China price ... is not giving it
any further impetus to take the next leg higher," he added.
China's key stock index .SSEC ended down, while European
stocks sagged in early trade. Equity markets are often seen as a
key economic indicator. [.EU]
"Stocks fell today for the first time in four days as
investors speculated that recent rises had been excessive given
the renewed prospects of a slowing economic recovery,"
investment bank Fairfax said about China in a research note.
"The economy is widely expected to cool further as a result
of the government's continued commitment to curbing excessive
growth in the property market and unnecessary bank lending."
ALUMINIUM FOCUS
Bucking the inventory trend, aluminium stocks rose 20,975
tonnes on Tuesday, with the focus turning to premiums for nearby
delivery due to tight supplies and dominant holdings of warrants
in LME warehouses and cash contracts. [ID:nLDE67F0PL]
Aluminium prices CMAL3 edged lower to $2,135 versus
$2,141. LME stocks for the metal, used in transport and
packaging, have climbed 91,800 tonnes so far this week to 4.47
million tonnes.
Although LME stocks stand at near record levels, much is
tied up in financing deals making for tight supplies of metal,
dragging the market into a backwardation. [ID:nLDE67F0PL]
<0#LME-STOCKS>
There was a premium of $3.50 a tonne for material for
delivery on Thursday compared with material for delivery on
Friday -- known as tom/next. MALT-0
Nearly 34,000 lots, or about 850,000 tonnes, of aluminium
changed hands in tom/next trade on Tuesday. <0#CMAL:>
A physically backed aluminium exchange-traded product (ETP)
planned by Glencore International [GLEN.UL] and Credit Suisse
(CSGN.VX) is likely to be launched on a Swiss exchange, a source
familiar with the matter said. [ID:nLDE67G1G1]
"A lot of things going on," said Macquarie on aluminium.
"The important thing is that financing is still cheap, physical
premiums are still being subsidised by warehouses.
"The market isn't tight ... there is a huge excess of stock
above ground."
Tin CMSN3 traded at $21,300 versus $21,350, while the
premium for cash metal hovered around $140 to the three-month
forward contract MSN0-3.
Tin CMSN3 was at $21,300 from $21,350, while zinc CMZN3
traded at $2,138 a tonne from $2,123.
Used in electrical solder, tin touched $21,650 on Tuesday,
its highest level since August 2008.
Rains in top tin exporter Indonesia may cut output in South
East Asia's biggest economy. [ID:nJAK407383]
Among other metals, steel making ingredient nickel CMNI3
traded at $22,080 from $21,950 while battery material lead
CMPB3 was at $2,153.25 from a final bid at $2,130 on Tuesday.
Metal Prices at 1009 GMT
Comex copper in cents/lb, LME prices in $/T and SHFE prices in
yuan/T
Metal Last Change Pct Move End 2009 Ytd Pct
move
COMEX Cu 334.20 0.35 +0.10 334.65 -0.13
LME Alum 2128.00 -13.00 -0.61 2230.00 -4.57
LME Cu 7381.00 -1.00 -0.01 7375.00 0.08
LME Lead 2142.00 47.00 +2.24 2432.00 -11.92
LME Nickel 22030.00 80.00 +0.36 18525.00 18.92
LME Tin 21100.00 -250.00 -1.17 16950.00 24.48
LME Zinc 2132.00 9.00 +0.42 2560.00 -16.72
SHFE Alu 15500.00 -30.00 -0.19 17160.00 -9.67
SHFE Cu* 58040.00 290.00 +0.50 59900.00 -3.11
SHFE Zin 17440.00 95.00 +0.55 21195.00 -17.72
** Benchmark month for COMEX copper
* 3rd contract month for SHFE AL, CU and ZN
SHFE ZN began trading on 26/3/07
(Reporting by Michael Taylor; editing by Jane Baird)
